National Aluminium Company Ltd
(BSE Code: 532234) (CMP: Rs.69.35) (FV: Rs.5) By Rahul Sharma
Incorporated in 1981, National Aluminium Company Ltd (NALCO) is a Government of India entity with integrated aluminum complexes encompassing bauxite mining, alumina refining, aluminum smelting and casting, power generation, rail and port operations. The management plans to incur capex of ~Rs.1100 crore in FY19 with an aim to achieve 2.1 million metric tonnes (MMT) alumina output and 415 kt aluminum metal output during the year. NALCO has initiated a buyback of its shares at Rs.75/share. Currently, the stock trades below the buyback price and looks attractive. Aluminum prices are on the rise, which yields better realizations for NALCO. We expect aluminum prices to remain firm in the near-to-medium term, which is a positive for NALCO.
Key Risks: (i) Normalcy in import of aluminum, which will bring down aluminum prices; (ii) rupee appreciation.
Conclusion: With the management’s strong focus on backward integration and on-going development of two coal mines, we expect NALCO’s EBITDA margin to improve along with a higher turnover. We recommend this stock for a price target of Rs.105.
The stock’s 52-week high/low is Rs.96.65/56.55 and its market cap stands at Rs.13404.86 crore.