Shares of National Aluminium Company Limited (NALCO) jumped 6% on May 28, reaching an all-time high of ₹206.30 on the National Stock Exchange (NSE) after the company posted strong earnings for the quarter ending March 2024.
Brokerages are optimistic about NALCO. Motilal Oswal raised its target price for the stock, and Axis Securities maintained its ‘buy’ rating.
Strong Q4 Performance
NALCO, a Navratna PSU under the Ministry of Mines, is one of India’s largest integrated bauxite-alumina-aluminium-power complexes. The company’s consolidated profit for Q4FY24 doubled to ₹996.74 crore, driven by lower expenses. However, its total income for the quarter dropped to ₹3,663.09 crore from ₹3,726.76 crore in the same period last year.
Expenses fell to ₹2,720.42 crore in Q4, thanks to a 22% drop in raw material costs. This reduction was due to lower prices for thermal coal and bauxite, as NALCO sourced more domestic coal and bauxite. These lower costs were partially offset by a decline in aluminium prices.
The benchmark three-month aluminium price on the London Metal Exchange averaged $2,241 per metric ton in January-March 2024, down 8.2% from the same period in 2023.
Analyst Recommendations
Recently, NALCO’s joint venture KABIL signed its first lithium exploration and mining agreement with Argentina’s CAMYEN SE. Analysts at Motilal Oswal believe this will help NALCO diversify its products and enhance its supply chain for critical minerals used in various sectors. Additionally, NALCO’s involvement will provide technical and operational experience for lithium exploration and extraction.
Motilal Oswal expects NALCO to operate at full capacity until the fifth stream of its alumina refinery becomes operational in May 2025. The Utkal D coal block will meet about 25-28% of the coal needs for the Angul smelter, enhancing raw material security and boosting margins. Motilal Oswal has a ‘Neutral’ rating on the stock with a target price of ₹180 per share.
Axis Securities noted that NALCO is consistently operating at full refining and smelting capacity (460 ktpa). The recent decrease in thermal coal prices has led to lower power costs. Axis Securities revised its estimates for aluminium and alumina prices upwards, reflecting an increase in EBITDA. Despite the recent stock rally, they maintained a ‘buy’ rating with a target price of ₹215.
As of 11:36 am, NALCO shares were trading 1% higher at ₹195.75 on the NSE.
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