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MOSL: NALCO (Buy) 4QFY21: Beneficiary of higher aluminum prices

NALCO 4QFY21: Beneficiary of higher aluminum prices

(NACL IN, Mkt Cap USD2b, CMP INR80, TP INR93, 16% Upside, Buy)

 

Retain Buy on strong earnings outlook

• Nalco (NACL)’s 4QFY21 result was strong, led by higher LME prices and lower costs. It reported EBITDA of INR9.4b (+118% QoQ) and PAT of INR6.3b (+162% QoQ).
• We raise our FY22E/FY23E EBITDA estimate by 43%/27%, factoring in higher aluminum prices, which should support strong cash flows and a good dividend payout. Maintain Buy.

 

Higher LME and lower costs boost EBITDA by 118% QoQ

• Revenue / EBITDA / Adj. PAT was up 19%/118%/162% QoQ to INR28.2b/INR9.4b/INR6.3b (+3%/49%/63% v/s our estimate).
• The beat on EBITDA was led by better-than-expected costs, partly owing to the reversal of renewals purchase obligations – as per the notification issued by Odisha Electricity Regulatory Commission – booked under other expenses. Employee cost was down 11% QoQ to INR4.31b and other expense 31% QoQ to INR2.8b.

The company has opted for the new tax regime, thus reversing its deferred tax liabilities by INR4.23b – leading to net tax credit of INR0.97b during the quarter. Adjusted PAT, thus, stood at INR6.3b (+162% QoQ; +63% v/s est).