Nalco Stock Drops 13% As Brokerages See Near-Term Outlook Uncertain
Shares of National Aluminium Co. shed nearly 13% to Rs 82.10 apiece after the company missed estimates in the quarter ended June.
While analysts see higher costs and uncertain capital allocation to weigh on the company’s value creation, a rise in spot aluminium prices is likely to aid its margin and profitability in subsequent quarters.
Nalco Q1FY22 Highlights (Consolidated, QoQ)
Net profit at Rs 347.48 crore, a fall of 63%. That compares with the Bloomberg consensus estimate of Rs 441 crore.
Revenue fell 12% to Rs 2,474.55 crore, against an estimate of Rs 2,580 crore.
Ebitda stood at Rs 580.78 crore, a decline of 38%. Analysts had pegged the metric at Rs 944.01 crore.
Margin was at 23.5% against 33.5%.
Of the 10 analysts tracking the company, six maintained ‘buy’, one suggested a ‘hold’ and three recommended a ‘sell’, according to Bloomberg data. The overall consensus price of analysts tracked by Bloomberg implied a downside of 0.5%.
What brokerages have to say about Nalco’s first-quarter results...
Kotak Institutional Equities
Maintains ‘sell’ but hikes target price from Rs 70 apiece to Rs 80, a potential downside of 15.07% from Friday’s close.
Lower volumes and higher cost weighed on Ebitda.
High cost structure and uncertain capital allocation likely to continue to remain a drag on value creation.
Aluminum margins were flat sequentially and failed to reflect higher metal prices.
Recommends ‘buy’, raises target price from Rs 94 apiece to Rs 107, a potential upside of 13.6% from Friday’s close.
Higher-than-expected costs and miss on volumes dragged Q1 numbers.
With spot LME aluminium prices rising, the near-term profitability outlook is strong.
Expects higher aluminium prices to absorb the cost shock and lead to improved margin in subsequent quarters.
With integrated mining operations, Nalco is the best play on higher LME prices.
Systematix Institutional Equities
Maintains ‘buy’ with a target price of Rs 117 apiece, a potential upside of 24.20% from Friday’s close.
Alumina production for the quarter below estimates.
June-quarter performance weak on all fronts; higher power and staff cost, other expenses and lower metal sales weighed on the earnings.
Recent uptick in alumina prices, continued rise in aluminum prices and cheap spot e-auction coal prices would drive near-term earnings.
Volume imbalances are likely to weigh on alumina prices in the near term.