Norsk Hydro (Sell, TP: NOK55.00) - Trading at 20x P/E on core earnings
Norsk Hydro reported somewhat soft Q4 results, with a 2% EBITDA miss, DPS 10% below consensus, and a rather weak earnings mix. We continue to believe aluminium prices should near USD2,200/t as the global market balance turns to surplus. We have cut our 2023e EBITDA by 9% on declining aluminium prices, while our 2024e EBITDA is unchanged. We consider the historically high 2023e P/E of 13x too rich, with 40% of consensus 2023 EBIT stemming from low-quality earnings items, leaving it trading at a P/E of 20x on core earnings. 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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