Hold National Aluminium Company; target of Rs 94: ICICI Securities

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ICICI Securities' research report on National Aluminium Company

NALCO’s Q1FY24 EBITDA at INR 5.9bn missed our estimate by 9%. Key points: 1) Aluminium (Al) volume was down 7% YoY, flat QoQ at 117.1kt; 2) EBIT of both chemicals and aluminium divisions was down owing to lower realisation; 3) power & fuel cost rose 4% YoY despite commencement of captive mining at Utkal D block; and 4) Board recommended final dividend of INR1/share for FY23. Going ahead, we see LME Al price remaining constrained between USD 2,100- 2,300/t; however, cost efficiencies from Utkal D block are likely to aid earnings.

Outlook

Taking cognisance of potential cost efficiencies from Utkal D block, we raise EV/EBITDA multiple to 5x (earlier 4.5x), resulting in a revised TP of INR 94 (earlier INR 86). That said, at CMP, the stock looks fairly valued. We downgrade NALCO to HOLD (earlier ADD).

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National Aluminium Company - 17 -08 - 2023 - isc