22 AUGUST 2013www.myiris.com
NALCO gets 'Reduce' rating from ICICI Securities
Edited by : AL CIRCLE
2 min read
ICICI Securities has maintained 'Reduce' on National Aluminium Company (NALCO) with target price of Rs 27 as against current market price (CMP) of Rs 26 in its report.
Commenting on the investment rationale, ICICI Securities said, ''National Aluminium Company (NALCO) reported lower than expected Q1FY14 earnings results, with 12% top line and 20% EBITDA disappointment. The disappointment came in Alumina and Aluminium production as well higher-than-expected power and fuel costs.
Despite getting 89% linkage allotment, NALCO (Q,N,C,F)* witnessed Rs 400/te QoQ increase in coal costs. To note here, the premiums achieved on Aluminium sales are much more market linked compared to that for Bharat Aluminium Company (BALCO) and Vedanta Aluminium (VAL; USD 216/te for Q1FY14). The company undertook shutdown of 198 pots, and sees a much more comfortable coal stock position compared to Q2FY13.
Hence, any kind of sudden volatility in profits compared to those in the past year should not be expected. However, we continue to maintain our structural negative stance on the Aluminium sector, as we see no respite from margin stress in the coming quarters especially as Aluminium prices remain under pressure. We have revised our FY14/FY15 EBITDA estimates by 38%/23% respectively to reflect lower volumes, fall in Aluminium prices and rising costs (adjusting for increase in coal prices by Coal India). Maintain REDUCE with a revised target price of Rs 27/share.''
Commenting on the investment rationale, ICICI Securities said, ''National Aluminium Company (NALCO) reported lower than expected Q1FY14 earnings results, with 12% top line and 20% EBITDA disappointment. The disappointment came in Alumina and Aluminium production as well higher-than-expected power and fuel costs.
Despite getting 89% linkage allotment, NALCO (Q,N,C,F)* witnessed Rs 400/te QoQ increase in coal costs. To note here, the premiums achieved on Aluminium sales are much more market linked compared to that for Bharat Aluminium Company (BALCO) and Vedanta Aluminium (VAL; USD 216/te for Q1FY14). The company undertook shutdown of 198 pots, and sees a much more comfortable coal stock position compared to Q2FY13.
Hence, any kind of sudden volatility in profits compared to those in the past year should not be expected. However, we continue to maintain our structural negative stance on the Aluminium sector, as we see no respite from margin stress in the coming quarters especially as Aluminium prices remain under pressure. We have revised our FY14/FY15 EBITDA estimates by 38%/23% respectively to reflect lower volumes, fall in Aluminium prices and rising costs (adjusting for increase in coal prices by Coal India). Maintain REDUCE with a revised target price of Rs 27/share.''
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