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Nalco shares surge on strong Q4 performance

Mid Cap
May 27, 2023, 4:17 pm

As National Aluminium Co (Nalco)'s Q4 revenues and profits above market expectations, the company's shares increased by more than 5%. Despite the possibility that aluminium prices will continue low due to the slow global economic expansion, the government-run company in India is optimistic about improving profitability in the current fiscal year.

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After National Aluminium Co (Nalco) reported results for the March quarter that were higher than expected, the company's shares reached their highest level in more than four months on Friday.

Despite the possibility that aluminum prices would remain flat in a year in which global economic growth is anticipated to be at best modest, the state-run company's profitability is predicted to increase in the current fiscal year.

On the National Stock Exchange, the shares closed at 84.60, up more than 5% over the previous close, after seeing their biggest increase in almost three months.

Despite a 15% year-over-year decline in revenues for the aluminum manufacturer in the March quarter, results were better than anticipated thanks to stronger aluminum and chemical segment realizations. Even though they were lower year over year, the operating profit and net profit nonetheless exceeded analysts' expectations because to lower labor and electricity expenses.

According to the company's top executives, its focus is going to concentrate on completing the construction of the 5th stream refinery project as well as the development of the Pottangi Bauxite mines and the Utkal D & E coal blocks in Odisha.

The aluminum refinery will buy bauxite from the Pottangi mine and increase Nalco's capacity by 1 million tonnes to 2. 2 million tonnes. The Utkal D block, which has a 2 million tonne annual capacity, started producing in April.

According to ICICI Securities, the commissioning of the fifth stream of the alumina refinery and the start of operations at the Utkal D & E coal blocks would further boost volume growth in the alumina sector and reduce power costs for the Al division.

The brokerage has upgraded the stock's rating to 'add' from 'hold' previously and raised its target price by roughly 9% to 86 rupees. The firm expects profitability to rise to 22% by 2024-25 (Apr-Mar) from 20. 9% currently.

The company's earnings could benefit from the secure supply of raw materials and strong demand in India, according to Motilal Oswal Securities, which increased its target price to 90.

However, Kotak Institutional Equities warned that the refinery's development could dilute returns and predicted that profits would stagnate between 2023 and 2026 as a result of flat volumes and low commodity prices. Additionally, it expects free cash flow to be negative during this time


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