National Aluminium Company Ltd. share price target

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.

Recommendation: We revise our EBITDA estimates upwards on lower coal costs, our TP of Rs 90/share implies a 12% upside from the CMP and we upgrade NALCO from HOLD to BUY.

NALCO’s Q4FY23 EBITDA of Rs7.7bn (down 53% YoY, up 64.6% QoQ) was significantly ahead of consensus and our estimates of Rs5.4bn primarily on lower than expected power and fuel cost.

Capex requirement and probable cost overruns over the next few years on alumina refinery plant expansion along with delay in commissioning of coal blocks could put pressure on the cash flows of the company. We maintain our HOLD rating on NALCO.

NALCO’s Q3FY23 EBITDA of Rs4.6bn (down 61% YoY) was significantly ahead of consensus and our estimates primarily due to lower than expected power and fuel cost.

NALCO’s Q2FY23 EBITDA of Rs3.3bn (down 70% YoY) missed estimates owing to the double whammy of lower volume and higher cost, primarily at aluminium (Al) division.