Add Nalco, target price Rs 235: ICICI Securities

ICICI Securities has an add call on National Aluminium Company (Nalco) with a target price of Rs 235. The current market price of Nalco is Rs 219.8. National Aluminium Company Ltd., incorporated in 1981, is a Mid Cap company with a market cap of Rs 40382.02 crore, operating in Metals - Non Ferrous sector.

Nalco's key products/revenue segments include Aluminium, Chemicals, Export Incentives, Wind Power for the year ending 31-Mar-2024.



Financials
For the quarter ended 30-09-2024, the company has reported a Consolidated Total Income of Rs 4073.27 crore, up 39.66 % from last quarter Total Income of Rs 2916.62 crore and up 30.89% from last year same quarter's Total Income of Rs 3112.02 crore. The company has reported net profit after tax of Rs 1062.18 crore in the latest quarter.

Investment Rationale
In ICICI Securities' view, National Aluminium Company (Nalco) having the highest exposure to alumina among peers, is the key beneficiary of elevated alumina prices. In its Q3CY24 earnings call, Alcoa management mentioned that the market is expected to stay tight until March '25. Besides, supply growth in CY25 is reliant on schedule of projects in Indonesia, India and resolution of disruptions. Besides, Chinese domestic bauxite supply stays constrained and seaborne imports remain high.

As a result, the brokerage has revised its FY25/26E alumina price estimates by a hefty 34%/28% compared to earlier estimates to $562/te/ S576/te, respectively. As a result, the FY25/26E EBITDA estimate is up 59%/67%. The brokerage has revised the target price to Rs 235 (earlier Rs 145) on an unchanged 5.5x FY26E EBITDA. They have kept the multiple unchanged as the revised alumina prices are still lower than the current price of $693/te. ICICI Securities has upgraded Nalco to ADD (from Sell).

Promoter/FII Holdings
Promoters held 51.28 per cent stake in the company as of 30-Sep-2024, while FIIs owned 12.08 per cent, DIIs 19.29 per cent.