Norsk Hydro (Sell, TP: NOK55.00) - Low Q3 expectations met
The Q3 results were slightly below consensus. Hydro Rein is set to become a joint venture (50.1%/49.9%) with Macquarie Asset Management, in a transaction that we expect to be NPV-neutral for Norsk Hydro. We still find Norsk Hydro’s share price too lofty, as 25–35% of 2023–2025e EPS is non-core or temporary earnings items. Also, we see significant downside risk to aluminium prices given the high demand growth expectations that appear to be prevailing in the market. We have reduced our 2023–2025e EPS by c2–4%, and 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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