Norsk Hydro (Sell, TP: NOK50.00) - Q1 slightly on the soft side

Q1 EBITDA was c2% below consensus, with a somewhat soft mix, as Extrusions and Aluminium Metal, the two largest segments, were below forecasts. We have increased our 2024e EPS by 7% on the USD2,600/t spot aluminium price, and 2025–2026e by 2% on the Q1 results. We are 30% below consensus 2025e EBITDA; we do not see enough demand to raise aluminium prices above the marginal producer’s cost, as the price appreciation in recent weeks suggests. We still expect aluminium prices to decline with lower ...

Demand growing faster than supply - BUY

Q1'24 EBITDA of NOK 5.4bn, '24e-'26e EBIT up 2-3% post report. Market tightening rapidly in Q1 - demand up 5%, supply up 3%. Reiterate BUY — TP NOK 75.

EBITDA 2% below on higher cost

Norsk Hydro (Sell, TP: NOK50.00) - 30% below 2025e EPS consensus

We expect aluminium prices to come down with falling global energy prices, and reiterate our SELL and NOK50 target price. We are 30% below consensus on 2025e EBITDA; we do not see large enough demand to raise aluminium prices above the marginal producer’s cost, as suggested by the price appreciation in recent weeks, we believe. We expect Q1 EBITDA of NOK6.2bn (results due at 7:00 CET on 24 April), driven by high hydropower production volumes in the quarter. We have reduced our 2025–2026e EPS by ...

Norsk Hydro (Sell, TP: NOK50.00) - Little support for 22% EPS growth

Q4 EBITDA was 13% below consensus and we consider consensus 2023–2026e EPS CAGR of 22% too high (NOK7.8 in 2026e). Norsk Hydro’s earnings are closely linked to energy prices, and we expect global energy prices to continue to decline. Annually, EPS averaged NOK2.2 in the 10 years prior to Russia’s invasion of Ukraine, with lower energy prices. We have cut our 2024-2025e aluminium price forecast by USD50/t and our Norwegian electricity price by EUR10/Mwh, and our 2024–2025e EPS by 6–9%. We reitera...

Norsk Hydro (Sell, TP: NOK55.00) - Consensus too optimistic on 2025e

We are 20% below consensus on 2025e EPS, as we believe declining global energy prices will push aluminium prices down further, and not up as consensus estimates. Non-core earnings, which we highlighted to be NOK8bn per year 12 months ago, have shrunk to NOK3.5bn, and we believe they will decline further. We have trimmed our 2024–2025e EPS by 1–2%, and reiterate our SELL and NOK55 target price. We estimate Q4 EPS of NOK0.8 and a 2023e DPS of NOK2.8 (results due at 07:00 CET on 14 February).

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 ...

Norsk Hydro (Sell, TP: NOK55.00) - Softer Chinese aluminium demand

We reiterate our SELL and NOK55 target price, as in our opinion, global energy prices and softer aluminium demand from China should keep aluminium prices at USD2,200/t. We still believe the market is overlooking that 25–35% of consensus EBIT for 2024–2025 is of lower quality, as it stems from declining temporary electricity price arbitrage and government subsidies, which have a high risk of being reduced further or removed. We estimate Q3 EBITDA of NOK4.5bn.

Norsk Hydro (Sell, TP: NOK55.00) - Capex rising

The Q2 report included a 2023 capex guidance uplift of NOK4bn (NOK2/share), primarily due to FX and general inflation, and, at the presentation, management also indicated an impact on longer-term capex (which will be addressed at its annual CMD at the end of the year). Our 2023–2025e EPS is largely unchanged, but we have cut our DPS by NOK0.5 per year. We continue to find Norsk Hydro too richly valued, with 35–40% of its 2023–2025e earnings of lower quality, while we believe aluminium prices of ...

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Norsk Hydro (Sell, TP: NOK55.00) - Global energy prices stabilising

We expect Q2 EPS of NOK1.85 (results due at 07:00 CET on 21 July). We reiterate our SELL and NOK55 target price, based on a USD2,250/t aluminium price, as global energy prices are cooling to more normalised levels, reducing the cost of production for marginal producers. We still believe Norsk Hydro is too richly valued, as its share price suggests assigning a normalised P/E of 10x to all its earnings. In our view, a P/E of closer to 3x should be assigned to the 35% of 2024–2025e consensus EBIT t...

Norsk Hydro (Sell, TP: NOK55.00) - In-line results and softer cash flo...

Q1 EBITDA was in line with consensus. Given the 3–8% negative share price reaction, more focus appears to have been put on the somewhat disappointing net operating capital build guidance in 2023 (NOK2bn instead of the previously stated NOK4bn) and the announcement of the delay to the guided fuel switch project (implying cNOK600m lower 2023e EBITDA). We have reduced our 2024–2025e EPS by 3%. We continue to see the valuation at a 2024e P/E of 12x on its entire business as stretched, as we believe ...

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Norsk Hydro (Sell, TP: NOK55.00) - Easy come, easy go

We forecast Q1 EPS of NOK2.2 (results due at 07:00 CET on 28 April), up QOQ on improvements in Bauxite & Alumina (B&A) and Extrusions, along with increased CO2 compensation in Aluminium Metal. However, we consider the record-high 2023e P/E of 12x on consensus rich, as we estimate 40% of consensus 2023e EBIT comprises temporary, low-quality earnings. Our target price implies a P/E of just 3x for these non-core earnings (futures indicate the north/south spread has a few years to run), while we val...

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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...

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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 an...

Norsk Hydro ASA: 1 director

A director at Norsk Hydro ASA bought 5,000 shares at 6.550USD and the significance rating of the trade was 69/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors over the last two years clearly...

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