Nalco - March 2013 Results Preview - Motilal Oswal

- Net sales to increase 5% QoQ on higher alumina sales: We expect net sales to increase 5% QoQ (down 1% YoY) to INR17.8b on higher alumina volumes. Alumina production was affected in 3QFY13 due to lower bauxite availability. Its Panchpatmal bauxite mining operations were temporarily shut down due to expiry of mining lease, which now has received one-year temporary permit to operate. Alumina sales volume would increase 28% QoQ to 281k tons, while metal volumes would increase 2% QoQ to 102k tons.

- EBITDA to increase 34% QoQ: We expect EBITDA to improve 34% QoQ to INR2.5b. Operating performance will improve due to higher volumes and marginally higher realization.

- Power cost to remain high till Utkal coal block is commissioned; Maintain Neutral: NACL's smelters are not producing at full capacity due to lower margins in aluminum business. Weak LME coupled with high power cost has been affecting margins so far. Linkage coal supply has been infrequent and unreliable, adding to volatility in operating performance. Till the commissioning of Utkal coal block (~2mtpa), NACL will not be able to reap the full benefits of its increased refining and power capacity. The stock trades at 9.8x FY15E EPS, and an EV of 3.1x FY15E EBITDA. Maintain Neutral.

Source : Equity Bulls

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