CMD next week

How long will it last?

Beat on cost, but cost will come back in Q4

Norsk Hydro (Sell, TP: NOK50.00) - Aluminium is not a scarce resource

We reiterate our SELL and NOK50 target price, as we expect aluminium prices to return to a fundamentals-backed level of ~USD2,200/t soon. Aluminium prices – in line with copper – have surged twice this year, but we stress that aluminium is not set to become a scarce resource – as may be the case for copper. Copper is a mined metal where the possibility of scarcity has led to a price surge of ~400% since 2000, while aluminium prices have been largely flat in the same period as bauxite is abundant...

Upstream strong, downstream weak

Norsk Hydro (Sell, TP: NOK50.00) - Small EBITDA miss and cost creep

In a soft Q2, EBITDA missed consensus by 5%. The main negatives were higher fixed costs (up NOK300m QOQ) as well as muted downstream demand and results. We have reduced our 2025–2026e EPS by 1% on higher fixed costs. We reiterate our SELL and NOK50 target price as we expect aluminium prices to fall back towards USD2,200/t, with no fundamental support for the recent bounce.

Sometimes the market gets it wrong

Q2 below, but a low-quality miss. EBITDA estimates down 3% for '24e, up 1% for '25/26e. Reiterate BUY – TP NOK 75.

EBITDA 5% below, divisional results in line

We like the equity case, despite high cons ests.

We expect Q2'24 EBITDA of NOK 6.0bn. Factset cons at NOK 6.5bn. Our EBITDA estimates are up by 3-6%. Reiterate BUY — TP NOK 75

Norsk Hydro (Sell, TP: NOK50.00) - Back to fundamentals-based prices

Our Q2 EBITDA forecast of NOK7.6bn is based on higher aluminium prices (results due at 07:00 CET on 23 July). However, as we do not believe the recent bounce was founded on fundamentals, after Q2 we estimate prices to decline towards USD2,200/t, as seen in March. Norsk Hydro’s NOK64 share price reflects too-optimistic aluminium prices, in our view, and we reiterate our SELL and NOK50 target price. We have raised our 2025–2026e EPS by 5% to account for higher alumina prices.

Norsk Hydro ASA: 1 director

A director at Norsk Hydro ASA bought 6,800 shares at 69.340NOK 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 clearl...

Leading indicators

OECD: The indicator points up from a low level. US: The indicator points up (housing starts, monetary policy, interest rates, real FX). EU: The indicator points up from a low level (bond yields, stock market). Japan: The indicator is neutral (monetary policy, housing starts).

Vermilion Compass: Weekly Equity Strategy

Are the Lows "In" for this Pullback? While we are not yet out of the woods, we continue to see evidence that suggests the lows may be "in" for this pullback. Last week (4/23/24 Compass) we discussed the possibility that further downside was limited on the S&P 500 due to a multitude of reasons (SPX had simply filled 2/22/24 gap support that we had been discussing since late-February, Russell 2000 and Equal-Weighted S&P 500 were holding above key supports, short-term oversold conditions, subdued ...

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 ...