Norsk Hydro (Sell, TP: NOK55.00) - Easy come, easy go
We forecast Q1 EPS of NOK2.2 (results due at 07:00 CET on 28 April), up QOQ on improvements in Bauxite & Alumina (B&A) and Extrusions, along with increased CO2 compensation in Aluminium Metal. However, we consider the record-high 2023e P/E of 12x on consensus rich, as we estimate 40% of consensus 2023e EBIT comprises temporary, low-quality earnings. Our target price implies a P/E of just 3x for these non-core earnings (futures indicate the north/south spread has a few years to run), while we value the core earnings in line with the group’s historical average P/E of 12x. We thus reiterate our NOK55 target price and SELL.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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