National Aluminium Company Shares Surge Nearly 10% Today On Strong Q3 Results and Positive Analyst Views

Ajit Kushwaha

National Aluminium Company (NALCO) shares jumped nearly 10% on Thursday after the company reported strong financial results for the December 2023 quarter.

The state-owned aluminum producer announced a net profit of Rs 187.35 crore for Q3FY23, which represents a growth of 47% year-on-year.

NALCO Share Price Hits 52-Week High on Strong Q3 Show

NALCO share price hit a new 52-week high of Rs 127.46 apiece on the BSE, before closing at Rs 126.68 apiece. This marks a gain of 7.39% over the previous day’s closing. The company’s market capitalization now stands at nearly Rs 19,700 crore.

NALCO shares have delivered superb returns of 47% year-to-date in 2022. Over the past 5 trading sessions, the stock has surged nearly 5%.

NALCO Q3 Results Beat Estimates on Higher Aluminum Prices

NALCO’s Q3 results were ahead of analysts’ expectations, driven by higher LME prices and an increase in alumina sales volume. Here are some of the key highlights from the company’s Q3 report card:

  • Net profit rose 47% YoY to Rs 187.35 crore from Rs 127.74 crore last year
  • Net sales jumped 27% to Rs 3,437 crore versus Rs 2,736 crore in Q3FY22
  • EBITDA soared 66% YoY to Rs 615 crore compared to Rs 371 crore last year
  • Alumina sales volume increased 18% YoY to 445 KT
  • Average realized alumina price was $348 per ton versus $336 per ton last year

The company’s earnings benefited from better realization of aluminum prices. NALCO’s net aluminum realization stood at $2,272 per ton in Q3, higher than $2,249 per ton in Q2FY23.

NALCO Bullish on Aluminum Demand Outlook

In its post-earnings press release, NALCO expressed optimism about aluminum demand. The company expects global demand for aluminum to remain positive in 2023, aided by recovery in China. Aluminum consumption in India is also projected to grow at a healthy pace.

NALCO is progressing well on its capacity expansion plans. The company aims to increase its aluminum smelting capacity from the current 4.6 lakh tonne per annum to over 10 lakh tonne per annum.

Its alumina refining capacity is also slated to rise to 57 lakh tonne per annum. These expansion projects are expected to drive growth over the coming years.

Analysts Positive on NALCO Post Q3 Show

Brokerages have turned bullish on NALCO stock after its strong Q3 results and upbeat outlook. As per data compiled by Fintoo, 4 analysts have a strong buy rating on the stock while 2 analysts recommend a buy. There are 2 hold ratings and 1 strong sell rating as well.

Analysts are impressed with NALCO’s turnaround over the past few quarters. The company has successfully lowered its debt burden while improving profitability. Its margins are seen benefiting further from higher LME prices and rising aluminum demand.

Emkay Global Financial Services has a buy rating on NALCO with a target price of Rs 150. The brokerage values the stock at 5.5x FY24E EV/EBITDA. ICICI Securities also has a buy rating with a target of Rs 150 based on 5x FY24E EV/EBITDA.

NALCO Enjoys Strong Financials and Low Valuations

Besides the growth prospects, NALCO stock also appears attractive considering its strong financial position and inexpensive valuations.

Some key aspects:

  • Robust balance sheet with net debt/equity of just 0.23x
  • Strong profitability with EBITDA margin of over 30%
  • Free cash flow generation picking up
  • Dividend yield of 5.6% at current prices
  • Trades at inexpensive valuations of 5.2x FY24E EV/EBITDA

Thus, the company offers a combination of growth, quality, and value. This explains analysts’ bullishness on the stock. NALCO seems well placed to generate market-beating returns for investors over the long run.

NALCO Shareholding Pattern: FIIs Hiked Stake in Q3

As per NALCO’s shareholding pattern for Q3FY23, foreign institutional investors (FIIs) increased their stake in the company during the quarter.

  • FII holding rose to 13.68% in Q3 from 12.92% in Q2
  • However, FII stake is lower than 15.15% in Q3FY22
  • Mutual funds’ shareholding declined marginally to 5.89% versus 6.01% in Q2
  • Promoter holding in NALCO stands steady at 51.28%

Overall, NALCO’s strong Q3 performance, upbeat outlook and attractive valuations make it a good bet for investors with a long-term perspective. The company seems to have turned the corner and is well-poised for healthy growth in 2023 and beyond.

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By Ajit Kushwaha Writer
Ajit Kushwaha is a stock market investor and business owner of a chips manufacturing company in Hazaribagh, Jharkhand. He holds a Bsc. from Vinobha Bhave University and leverages over 5 years of share market experience in managing investments and his snack food business.
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