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Expects to complete bauxite expansion by April 2011
Expansion: Expects to complete bauxite expansion to 6.3 mt and alumina refinery by Apr-11; this is in line with previous
communication. Damanjodi expansion trial run to start in Apr-11 as well.
Cash costs: Current mining cost of INR457/t to come down to INR412/t.
Aluminium production target for FY12 is 4.4mt; this is lower than our current estimates due to technological upgrade at
smelting pots and power cost issues. Pot upgrades will free an additional 92ktpa capacity.
Power sales are currently unviable due to OERC norms.
Coal mines: all mines at Talchiri (Coal India) are now closed; the company is finding it difficult to source coal locally.
Valuation and risks
We value Nalco at FY12e EV/EBITDA of 7.0x, at a premium to the 6.5x multiple that we use to value other non-ferrous
stocks in our coverage. NACL has historically traded at a premium to peers in India based on its better quality assets and
lower available equity float. We derive a target price of INR360 and rate the stock Underweight.
Lower than expected power costs and higher than expected aluminium prices form upside risks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Expects to complete bauxite expansion by April 2011
Expansion: Expects to complete bauxite expansion to 6.3 mt and alumina refinery by Apr-11; this is in line with previous
communication. Damanjodi expansion trial run to start in Apr-11 as well.
Cash costs: Current mining cost of INR457/t to come down to INR412/t.
Aluminium production target for FY12 is 4.4mt; this is lower than our current estimates due to technological upgrade at
smelting pots and power cost issues. Pot upgrades will free an additional 92ktpa capacity.
Power sales are currently unviable due to OERC norms.
Coal mines: all mines at Talchiri (Coal India) are now closed; the company is finding it difficult to source coal locally.
Valuation and risks
We value Nalco at FY12e EV/EBITDA of 7.0x, at a premium to the 6.5x multiple that we use to value other non-ferrous
stocks in our coverage. NACL has historically traded at a premium to peers in India based on its better quality assets and
lower available equity float. We derive a target price of INR360 and rate the stock Underweight.
Lower than expected power costs and higher than expected aluminium prices form upside risks.
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