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National Aluminium Company (NALU.BO)
Neutral Equity Research
Above expectations: Higher contribution from alumina
What surprised us
NALCO reported 1QFY12 net income of Rs3,768 mn (+33%yoy, +23% qoq),
14% above GS and 16% above Bloomberg consensus estimates. For the
quarter, revenue came in at 17,331mn (+34% yoy, -3% qoq), which was
largely in line with our estimates. At the operating level, EBITDA came in
at Rs5,298 mn (+17% qoq), implying margin expansion of about 519bp,
primarily driven by higher contribution from the alumina business. The
company reported alumina sales of 183 kT (vs. 99kT in 1QFY11) and
average realisations of US$418/ton (vs. US$353/ton in 1QFY11), higher
than our estimate of US$380/ton, driving a 9% higher-than-expected
EBITDA. Coal supplies from Coal India were regular and did not
necessitate use of any imported coal during the quarter, keeping the
power and fuel costs in check. Higher other income – due to enhanced
treasury yields and higher surplus funds – led to a 14% positive surprise at
the net profit level.
What to do with the stock
We fine-tune our FY12E-FY14E EPS by 1%-2% on account of higher
alumina realisations. At 1.3X FY12E P/B with 12.3% FY12E ROE, the stock
appears reasonably valued. We maintain our Neutral rating and our 12-
month P/B-based target price of Rs87. Risks: Upside – higher aluminium
and alumina prices; downside – news flow on potential divestment of
stake by Government of India.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
National Aluminium Company (NALU.BO)
Neutral Equity Research
Above expectations: Higher contribution from alumina
What surprised us
NALCO reported 1QFY12 net income of Rs3,768 mn (+33%yoy, +23% qoq),
14% above GS and 16% above Bloomberg consensus estimates. For the
quarter, revenue came in at 17,331mn (+34% yoy, -3% qoq), which was
largely in line with our estimates. At the operating level, EBITDA came in
at Rs5,298 mn (+17% qoq), implying margin expansion of about 519bp,
primarily driven by higher contribution from the alumina business. The
company reported alumina sales of 183 kT (vs. 99kT in 1QFY11) and
average realisations of US$418/ton (vs. US$353/ton in 1QFY11), higher
than our estimate of US$380/ton, driving a 9% higher-than-expected
EBITDA. Coal supplies from Coal India were regular and did not
necessitate use of any imported coal during the quarter, keeping the
power and fuel costs in check. Higher other income – due to enhanced
treasury yields and higher surplus funds – led to a 14% positive surprise at
the net profit level.
What to do with the stock
We fine-tune our FY12E-FY14E EPS by 1%-2% on account of higher
alumina realisations. At 1.3X FY12E P/B with 12.3% FY12E ROE, the stock
appears reasonably valued. We maintain our Neutral rating and our 12-
month P/B-based target price of Rs87. Risks: Upside – higher aluminium
and alumina prices; downside – news flow on potential divestment of
stake by Government of India.
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