Norsk Hydro (Sell, TP: NOK55.00) - Aluminium demand softening
We forecast Q3 EBITDA of NOK8.0bn. We still expect aluminium prices to fall towards USD2,100/t, taking Norsk Hydro’s EPS down to NOK5.5 in 2024e, but also see a downside risk from weaker demand and even a ‘hard landing’ recession scenario (aluminium prices fell below USD1,500/t in each of the past four recessions in the US). We believe Norsk Hydro is set to benefit from area price differences for electricity this winter, but that low reservoir levels in southern Norway and windfall taxes could erode the vast bulk of any extraordinary gains. We reiterate our SELL and NOK55 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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