National Aluminium – 1QFY12: Lower costs fuel EBITDA ::RBS

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National Aluminium reported 1QFY12 EBITDA of Rs5.0bn (+33% yoy and +20% qoq), higher
than our estimate of Rs4.1bn, due to lower-than-expected costs. We have a Hold on the stock
with TP of Rs91.


Lower costs drive earnings
􀀟 National Aluminium 1QFY12 net revenues were Rs17.3bn (+34% yoy and -3% qoq). This was
driven by both higher LME as well as higher alumina sales volumes. Average aluminium
realization increased 22% yoy to US$2,750/t. Alumina sales volumes were at 168kt (+68%

yoy and flat qoq) while aluminium sales volumes were at 110kt (+1% yoy and -7% qoq).
Alumina production was 400kt (+2% yoy and -4% qoq) while aluminium production was
110.8kt (-1% qoq and yoy).
􀀟 RM costs at Rs1.8bn declined 47% qoq. Power and fuel costs at Rs4.8bn (+30% yoy and
+2% qoq) were lower than expected considering the sharp price hike of Mahanadi coal fields
linkage price. Staff costs were in-line with expectations at Rs3.4bn (+55% yoy and flat qoq).
The lower expenses drove EBITDA to Rs5.0bn (+33% yoy and +20% qoq), 21% higher
versus our estimate of Rs4.1bn.
􀀟 Other income was higher than expected at Rs1.26bn, up 30% qoq. Depreciation expense
surprisingly declined sharply by 23% qoq to Rs1.01bn. This drove PAT to Rs3.76bn (+33%
yoy and +23% qoq).
􀀟 Nalco is currently trading at 10.6x/9.6x FY12/13F earnings and 4.9x/4.1x FY12/13F on an
EV/EBITDA basis. We have a Hold rating on the stock with TP of Rs91.