MOSL: NALCO (Buy)-Disappointment in the form of higher cost of production
NALCO: Disappointment in the form of higher cost of production; Cutting estimates due to lower alumina prices/higher CoP; Maintain Buy
(NACL IN, Mkt Cap USD1.5b, CMP INR59, TP INR69, 16% Upside, Buy)
NALCO's (NACL) EBITDA declined 40% QoQ (+10% YoY) to INR5.1b (our estimate: INR6.2b) in 3QFY19 owing to lower volumes/realizations and higher cost of production (CoP). The miss versus our estimate can primarily be ascribed to higher CoP. Adj. PAT declined 41% QoQ (+9% YoY) to INR3b (our estimate: INR3.8b).
- Alumina: Production increased 12% QoQ to 532kt, but sales were down 10% QoQ to 293kt. Realization declined 15% QoQ to USD485kt (est. USD450/t). CoP increased USD3 QoQ to USD323/t, despite the currency tailwinds.
- Aluminum: Production was down 8% QoQ to 105kt, while sales were down 10% QoQ to 104kt (our estimate: 112kt). Realization increased 3% QoQ to USD2,241/t, even as LME was lower, due to higher product premiums. CoP increased USD172 QoQ to USD2,109/t, accentuated by reduced volumes leading to lower absorption of fixed cost.
National Aluminium is engaged in the manufacture and distribution of aluminum related products and in the generation of electricity. Co.'s aluminum products include bauxite, zeolite, alumina hydrate, special grade hydrate, calcined alumina, special grade alumina, aluminium standard and sow ingots, aluminium wire rods, aluminium billets, aluminium strips and rolled products.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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