Norsk Hydro (Sell, TP: NOK55.00) - Capex rising
The Q2 report included a 2023 capex guidance uplift of NOK4bn (NOK2/share), primarily due to FX and general inflation, and, at the presentation, management also indicated an impact on longer-term capex (which will be addressed at its annual CMD at the end of the year). Our 2023–2025e EPS is largely unchanged, but we have cut our DPS by NOK0.5 per year. We continue to find Norsk Hydro too richly valued, with 35–40% of its 2023–2025e earnings of lower quality, while we believe aluminium prices of USD2,100–2,200/t are here to stay, based on global energy prices and the current demand outlook. We thus 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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