Neutral NALCO; target of Rs 350: Motilal Oswal

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Alumina business growth: Revenue from the alumina business grew 45% YoY to INR42b, driven by favorable LME prices. EBIT for the vertical stood at INR20b, up 73% YoY.
  • Aluminum business performance: Metal production stood at 120kt, up 1% YoY, and sales volume stood at 121kt, up 7% YoY. ASP stood at USD3,640/t, up 23% YoY.
  • Cost management: Alumina CoP is expected to remain broadly at 1HFY27 levels, with caustic soda prices increasing. CP coke prices increased, but management expects to reduce caustic soda consumption and improve techno-economic parameters.
  • Capacity expansion: The fifth stream refinery is expected to commence production in Jan'27, with ~0.15mt incremental production expected in FY27.

Thesis Validation Checklist

  • Alumina production volume: Expected to surge in FY28E, driven by the fifth stream refinery.
  • Alumina prices: Expected to remain at ~USD370-380/t over the near term, with potential upside towards USD400/t.
  • Cost control: Management's ability to reduce caustic soda consumption and improve techno-economic parameters will be crucial in maintaining profitability.
  • Capacity expansion: Timely completion of the fifth stream refinery and brownfield smelter expansion will be key to driving future growth.