Nirmal Bang recommends sell rating for NALCO stocks

Nirmal Bang is bearish on National Aluminium Company (NALCO) and has recommended sell rating on the stock with a target of Rs 49 in its August 16, 2012 research report.

“National Aluminium Company (NALCO) reported stable 1QFY13 results, with EBITDA being 6% and 3% above our/consensus estimates and PAT 16% and 1% above our/consensus estimates, respectively. Revenue was 4% and 3% above our/consensus estimates, respectively, implying higher volume compared to our/street assumptions. We retain our Sell rating and earnings estimates for NALCO while also maintaining our target price at Rs49.”

“NALCO posted 51% and 41% YoY drop in EBITDA and PAT, respectively, primarily driven by lower aluminium prices and higher costs. LME aluminium price in rupee terms corrected 8% YoY during 1QFY13. The company also reported a 26% YoY rise in power and fuel costs despite lower production compared with a year ago. The company had reported exceptional loss of Rs858mn for 1QFY12. On QoQ basis, the company reported 1% and 21% drop in EBITDA and PAT, respectively. Despite a drop of 2% in aluminium prices, EBITDA performance remained stable due to decline in other expenses. PAT drop was significantly higher than the fall in EBITDA as the company had reported an exceptional gain of Rs639mn in 4QFY12.”

“NALCO reported 17% YoY and 11% QoQ rise in alumina EBIT, largely driven by higher volume from a newly commissioned facility. Aluminium segment EBIT continued to incur losses. The company posted EBIT loss of Rs191mn compared to a loss of Rs165mn in 4QFY12 and a profit of Rs2,420mn in 1QFY12 for the aluminium segment. Power segment reported a drop of 26% QoQ in EBIT despite stable revenue, which implies higher coal costs on sequential basis although, it remained stable on YoY basis with a 5% increase,” says Nirmal Bang research report.