Shares of National Aluminium Company (NALCO) plunged over 12% on Monday to 82.7 per share on the BSE. The company on Friday had reported reported a significant rise in consolidated profit at 347.73 crore for the quarter ended on June 30, 2021. The company had reported a consolidated profit of 16.69 crore in the year-ago period.

Motilal Oswal in a result note said that NALCOs Q1FY22 result was below its expectations due to higher than expected costs and miss on volumes/realization. Though, it expects higher aluminum prices to absorb the cost shock and lead to improved margin in subsequent quarters. With integrated mining operations, NALCO is the best play on higher LME prices. The brokerage has a Buy rating on the stock with target price of 107 per share.

The miss on EBITDA was led by lower than expected aluminum volumes, lower than expected realizations, and higher than expected costs. Its aluminium and alumina sales also declined in a sequential basis.

With spot LME aluminum hovering over $2,550/t (up ~15% in FY22 YTD), the near term profitability outlook is strong. Alumina prices have not yet reacted to the strength in aluminum and could surprise positively in 2HFY22, the domestic brokerage said in the note on August 8. Given the tight demand-supply scenario, it expects aluminum prices to remain strong.

The management has announced a 1mtpa alumina refinery expansion at a capex of around INR64b, and expects to complete the project in FY23. Given its slow execution, we expect commissioning by FY24E, it added.

Nalco is a Navratna CPSE under the Ministry of Mines. The company has integrated and diversified operations in mining, metal and power. The Centre holds 51.28% equity of NALCO.

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