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National Aluminium Co (NACL)
Metals & Mining
Results miss estimate on high staff costs. Nalco’s 4QFY11 revenue of Rs17.9 bn
(+11.5%yoy, +25.4% qoq) was 7.9% ahead of our estimates. However, EBITDA of
Rs4.5 bn was below our estimate primarily on higher-than-expected staff costs. We
align Nalco’s earnings estimate with our aluminium price forecast and build in recent
changes in carbon and coal prices. As a result, we lower FY2013E EBITDA by 7.4%.
Nalco trades at expensive valuations of 18.3X FY2012E and 17.3X FY2013E earnings.
Maintain SELL with a TP of Rs76 based on end-FY2013E financials.
Increase in staff costs impacts operational performance
Nalco’s 4QFY11 revenue of Rs17.9 bn (+11.5% yoy, +25.4% qoq) was 7.9% ahead of our
estimates led by higher average realizations. Average realizations grew 27% sequentially to
US$2,869/tonne. However, EBITDA of Rs4.5 bn (-16.2% yoy, +16.5% qoq) was lower than our
estimate of Rs5.2 bn primarily on account of higher-than-expected staff costs. Staff costs increased
by 45.6% qoq and 76.8% yoy to Rs3.4 bn; this could be on account of the provision of gratuity
and retirement benefits. PAT of Rs3.1 bn was 13.2% lower than our estimate.
Capex and expansion projects
Nalco has outlined total capex of Rs10.5 bn in FY2012E towards various greenfield and brownfield
capacity expansion projects. This would include funds directed towards capacity enhancement of
its alumina refinery and for developing the Utkal coal mine which was recently allotted to them.
The management expects captive coal block to be operational by end-2012; this target appears
aggressive to us.
Revise our aluminium price assumptions
We align our estimates with our revised aluminium price forecast which increased by 6.7% and
6.5% to US$2,400/tonne and US$2,450/tonne for FY2012E and FY2013E, respectively. In
addition, we make changes to our cost estimates factoring in carbon and coal prices. We lower
alumina deliveries due to delay in commissioning of brownfield expansion. We raise FY2012E
EBITDA forecast by 2.3% and lower FY2013E estimate by 7.4%.
Maintain SELL on expensive valuations
Nalco currently trades at 18.3X FY2012E and 17.3X FY2013E earnings, expensive in our view. The
stock trades at FY2012E P/BV of 2.1X. We retain our target price at Rs76, even after we roll
forward our target price to end-FY2013E financials. Maintain our SELL rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
National Aluminium Co (NACL)
Metals & Mining
Results miss estimate on high staff costs. Nalco’s 4QFY11 revenue of Rs17.9 bn
(+11.5%yoy, +25.4% qoq) was 7.9% ahead of our estimates. However, EBITDA of
Rs4.5 bn was below our estimate primarily on higher-than-expected staff costs. We
align Nalco’s earnings estimate with our aluminium price forecast and build in recent
changes in carbon and coal prices. As a result, we lower FY2013E EBITDA by 7.4%.
Nalco trades at expensive valuations of 18.3X FY2012E and 17.3X FY2013E earnings.
Maintain SELL with a TP of Rs76 based on end-FY2013E financials.
Increase in staff costs impacts operational performance
Nalco’s 4QFY11 revenue of Rs17.9 bn (+11.5% yoy, +25.4% qoq) was 7.9% ahead of our
estimates led by higher average realizations. Average realizations grew 27% sequentially to
US$2,869/tonne. However, EBITDA of Rs4.5 bn (-16.2% yoy, +16.5% qoq) was lower than our
estimate of Rs5.2 bn primarily on account of higher-than-expected staff costs. Staff costs increased
by 45.6% qoq and 76.8% yoy to Rs3.4 bn; this could be on account of the provision of gratuity
and retirement benefits. PAT of Rs3.1 bn was 13.2% lower than our estimate.
Capex and expansion projects
Nalco has outlined total capex of Rs10.5 bn in FY2012E towards various greenfield and brownfield
capacity expansion projects. This would include funds directed towards capacity enhancement of
its alumina refinery and for developing the Utkal coal mine which was recently allotted to them.
The management expects captive coal block to be operational by end-2012; this target appears
aggressive to us.
Revise our aluminium price assumptions
We align our estimates with our revised aluminium price forecast which increased by 6.7% and
6.5% to US$2,400/tonne and US$2,450/tonne for FY2012E and FY2013E, respectively. In
addition, we make changes to our cost estimates factoring in carbon and coal prices. We lower
alumina deliveries due to delay in commissioning of brownfield expansion. We raise FY2012E
EBITDA forecast by 2.3% and lower FY2013E estimate by 7.4%.
Maintain SELL on expensive valuations
Nalco currently trades at 18.3X FY2012E and 17.3X FY2013E earnings, expensive in our view. The
stock trades at FY2012E P/BV of 2.1X. We retain our target price at Rs76, even after we roll
forward our target price to end-FY2013E financials. Maintain our SELL rating.
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