Norsk Hydro (Sell, TP: NOK55.00) - Global energy prices stabilising
We expect Q2 EPS of NOK1.85 (results due at 07:00 CET on 21 July). We reiterate our SELL and NOK55 target price, based on a USD2,250/t aluminium price, as global energy prices are cooling to more normalised levels, reducing the cost of production for marginal producers. We still believe Norsk Hydro is too richly valued, as its share price suggests assigning a normalised P/E of 10x to all its earnings. In our view, a P/E of closer to 3x should be assigned to the 35% of 2024–2025e consensus EBIT that is non-core (electricity-price arbitrage and CO2 compensation), which we believe is temporary.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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