Norsk Hydro (Buy, TP: NOK50.00) - Chinese coal prices normalising
Norsk Hydro reported an in-line Q4, with EBITDA close to consensus. The dividend policy was lifted to a 50% payout ratio, corresponding well with our NOK2 DPS for 2021e and 2022e. Chinese coal spot prices, which were temporarily driven higher earlier in the year by supply shortages and cold weather (peaking at RMB900/t), have now returned to a level similar to 12-month futures prices (RMB620–650/t). We believe this is equivalent to an aluminium price of just above USD2,000/t. We have made only minor estimate revisions on these price changes and the Q4 report, and reiterate our BUY and NOK50 target price.Norsk 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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