Norsk Hydro (Sell, TP: NOK55.00) - Valued too richly on core earnings
We forecast Q4 EBITDA of NOK8.5bn (results due at 07:00 CET on 14 February. Our 2023–2024e EPS are largely unchanged, with a positive effect from increasing aluminium prices offset by a negative effect from lower southern Norwegian electricity prices. We continue to believe that aluminium prices will come down towards USD2,200/t. We consider the historically high 2023e P/E of 13x too rich, with 30–40% of consensus 2023e EBIT being temporary or low-quality earnings items. 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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