Norsk Hydro (Buy, TP: NOK45.00) - As hot as coal
In this report we explain why the market’s concerns about higher aluminium inventories and net supply additions in 2020–2022e are unlikely to hurt aluminium prices. We believe the coal price sets the level for the aluminium price, and that high infrastructure investments and Chinese government price control policies will lead to coal prices of USD80–90/t and aluminium prices of USD1,950–2,000/t. This price level yields a 2021e run-rate EPS for Norsk Hydro of NOK3.6, placing the stock’s fair value at NOK45/share (our new target price, previously NOK32) when applying its average P/E since 2008 of 12.2xNorsk Hydro is an aluminium group based in Norway. Co. is engaged in the supply of aluminium and aluminium products. Co. supplies casthouse products, such as extrusion ingots, sheet ingots and foundry alloys. Co's customers are active in sectors such as the packaging, lithographic, building, automotive and transport sectors. In addition, Co. is engaged in the production of power in Norway. Its business is divided into six operating segments: Bauxite & Alumina, Primary Metal, Metal Markets, Rolled Products, and Energy and Other and Eliminations.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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