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Stock recommendation: National Aluminum Company Ltd — Add — Target price Rs 80
Publish date: August 9, 2018
Results update: Strong quarter backed by higher prices
National Aluminium Company Limited (NALCO) saw its earnings swell in the first quarter, mainly because supply disruptions in Brazil spiked alumina prices.
Key highlights
- NALCO’s first quarter earnings was ahead of our estimates, clocking a whopping 106% (QoQ) increase.
- The company’s net income increased to Rs 6.9 billion, a 167% (QoQ) jump.
- Alumina prices increased by 40% (QoQ) due to supply restraints in Brazil over legal/political issues. The prices increased from $400 per ton in March 2018 to $520 per ton in August 2018. As a result, the alumina EBIT increased by 75% (QoQ).
Valuation & outlook
We expect EBITDA to increase further due to continuing supply constraints. Plus, the fundamentals of aluminum is improving as strong demand is expected to outstrip the supply side for some time. Therefore, we keep a positive view on the stock.
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