Company Update: NALCO - BUY - TP Rs.100 - Kotak

US sanctions on Rusal (April 2018) and alumina cost push led to ~10% rise in the aluminium prices since Feb'18 end. Besides, supply disruptions, the sanctions also restrict Rusal's ability to complete new projects or ramping up of exiting capacities (1.5-1.6MT), restricting any new supply coming into the market. This, coupled with China's emphasis on environmental sustainability should support aluminium prices in the near to medium term. As we believe that, lower supply from China, low inventory, and deficit (ex-China) will continue to support the aluminium prices. Given the recent uptick in aluminium prices, we believe, NALCO should report improvement in operating performance for its Aluminium segment from 1QFY19 onwards, provided the current LME prices sustain. Besides, this the sharp surge in Alumina prices would also boost the overall earnings for the company. We revise our earnings to Rs7.5 (earlier Rs7.0) and Rs7.7 (earlier Rs7.6) for FY19E and FY20E, respectively. While we continue to assess the development, a positive impact on aluminium and alumina is apparent in the near term. At current valuation of 5.0x/4.7x FY19E/FY20E EBITDA, the stock is trading at attractive level. We continue to maintain our BUY rating with an unchanged target price of Rs100.

Shares of NATIONAL ALUMINIUM CO.LTD. was last trading in BSE at Rs.76.75 as compared to the previous close of Rs. 76.95. The total number of shares traded during the day was 1878874 in over 3303 trades.

The stock hit an intraday high of Rs. 77.75 and intraday low of 75.8. The net turnover during the day was Rs. 144215050.

Source : Equity Bulls

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