Norsk Hydro (Sell, TP: NOK55.00) - In-line results and softer cash flow
Q1 EBITDA was in line with consensus. Given the 3–8% negative share price reaction, more focus appears to have been put on the somewhat disappointing net operating capital build guidance in 2023 (NOK2bn instead of the previously stated NOK4bn) and the announcement of the delay to the guided fuel switch project (implying cNOK600m lower 2023e EBITDA). We have reduced our 2024–2025e EPS by 3%. We continue to see the valuation at a 2024e P/E of 12x on its entire business as stretched, as we believe 40% of its 2023e earnings instead deserves a P/E of 3x given its duration. Thus, 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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