National Aluminium Company Ltd. share price target

INR24.7b/INR5.8b/INR3.5b and was 15%/34%/38% below our estimate. Sequentially, the decline was led by lower volumes and higher costs (on a lower base due to one-offs), partly offset by higher LME prices. The miss on EBITDA was led by lower than expected aluminum volumes (91kt, 9% lower than our estimate), lower than expected realizations, and...

Revenue / EBITDA / Adj. PAT was up 19%/118%/162% QoQ to INR28.2b/INR9.4b/INR6.3b (+3%/49%/63% v/s our estimate). The beat on EBITDA was led by better-than-expected costs, partly owing to the reversal of renewals purchase obligations as per the notification issued by Odisha Electricity Regulatory Commission booked under other...

Nalco's (NACL) 3QFY21 result was strong on the back of higher LME prices. It reported an EBITDA of INR4.3b (+57% QoQ) and PAT of INR2.4b (+123% QoQ). We raise our FY21E/FY22E EPS estimate by 9%/13% to factor in a lower tax rate. We expect alumina prices to stay strong which should support strong cash flows and a good dividend payout (8% yield in FY22). Maintain Buy....

Nalco's (NACL) 2QFY21 higher-than-expected EBITDA at INR2.8b (v/s est. INR2.2b) and volumes were a surprise once again. EBITDA continues to strengthen due to LME recovery and lower input commodity costs. We raise our FY21/FY22E EBITDA estimates by 36%/28% to factor in the recovery in LME prices. Maintain Buy....

We raise our FY21 EBITDA estimate by 67% to factor recovery in LME prices, Revenue declined 34% YoY (29% QoQ) to INR13.8b on a lower LME aluminum price of USD1,493/t (-17% YoY; -12% QoQ) and lower aluminum volumes. EBITDA at INR1.3b (-38% QoQ) came in above our estimate of INR81m despite lower-than-expected volumes. Reported EBITDA still declined 40% YoY on lower alumina and It reported positive EBIT at INR470m after four quarters (v/s INR3m loss last year); revenue declined to INR9.3b (-37% YoY; -18% QoQ) on lower LME prices/volumes due to the impact of COVID-19. Aluminum LME prices have recovered to pre-COVID levels and turned positive YoY. We expect NACL to benefit from lower coal prices due to improved coal availability in India and lower input commodity costs such as furnace oil, etc. We maintain our positive stance on NACL considering its integrated business model, high cash levels, and attractive dividend yield.

NACL reported an improved 4QFY20 result, as expected, driven by lower cost of production. We raise our FY21 EBITDA estimate to factor lower input costs in FY21. Revenue declined 30% YoY (-7% QoQ) to INR19.4b on a lower LME aluminum price of USD1,694/t (-9% YoY, -3% QoQ). EBITDA at INR2.1b (+507% QoQ) came in above our estimate of INR1.2b, led by lower-than-expected production costs. Reported EBITDA still declined 60% YoY due to lower alumina and aluminum prices. EBIT loss was at INR0.2b (v/s INR1.9b profit last year); revenue declined to INR11.3b (-34% YoY, -15% QoQ) on lower LME prices/volumes due to the impact of COVID-19. Realization declined 8% YoY (and 3% QoQ) to USD1,905/t on account of lower LME and premiums. As a result, Operating Cashflows (OCF) were negative at INR3.5b. With estimated gradual recovery in aluminum demand, we expect prices to rise further.

Extended monsoons have also disrupted coal supplies in Q3. Hence, operationally Q3 should be weak. In addition, plans to diversify into unrelated minerals outside India at a peak of euphoria for Lithium and Cobalt could be value-dilutive, in our view. We revise FY20E EBITDA/PAT by 62%/66%, factoring in dismal Q2 results and also cut FY21/22E EBITDA by 24%/3% factoring in lower profitability. We value the stock at 4.5x Sep-21E EV/EBITDA. Downgrade NALCO to Sell with a TP of Rs37 (43 earlier) with UW stance in EAP. Key risk is higher alumina prices. Despite higher sales in Q2FY20, EBIT was significantly down, indicating that the company...

Higher cost and lower realization impact performance Cutting estimates to factor in alumina/LME price decline EBITDA of INR2.1b (-59% QoQ) came in below our estimate of INR4.3b owing to higher aluminum cost of production, lower-than-expected aluminum volumes and likely lower alumina volumes. The sequential decline in EBITDA can be attributed to...

Robust quarter on lower costs, strong volumes Cutting estimates to factor in alumina/LME price decline; Maintain Buy EBITDA of INR5.2b (-10% QoQ) was 42% ahead of our estimate due to (a) lower power & fuel costs (-22% QoQ) and (b) higher alumina volumes (we assume to have come in at 380kt). The sequential decline in EBITDA can be attributed to lower...

9 February 2019 INR6.2b) in 3QFY19 owing to lower volumes/realizations and higher cost of production (CoP). The miss versus our estimate can primarily be ascribed to higher Production increased 12% QoQ to 532kt, but sales were down 10% QoQ to 293kt. Production was down 8% QoQ to 105kt, while sales were down USD2,241/t, even as LME was lower, due to higher product premiums. CoP increased USD172 QoQ to USD2,109/t, accentuated by reduced volumes leading to lower absorption of fixed cost. NACLs performance was impacted by alumina prices coming off their recent highs and fixed cost absorption being lower due to reduced volumes. We expect volumes to improve, which should drive down CoP, but the alumina benchmark prices have fallen further as Chinese supply is rising. We cut our alumina price estimate from USD400/t to USD350/t for FY20-21. We have also marginally cut aluminum product premiums and increased CoP.