Result Update: National Aluminium Company Ltd - BUY - TP Rs.100 - Kotak

National Aluminium (NACL) Q1FY19 numbers were above our estimates, driven by better than expected alumina segment performance. The alumina performance improved sharply backed by strong realisation (up 40% QoQ) and we expect the prices to remain firm due to supply disruptions, which will support earnings in the near term.

Key Highlights

- Higher realisation supported 118%/18% YoY/QoQ growth in Alumina revenue to Rs20.53bn. Alumina volume during the quarter stood at 320KT, while aluminium sales was 12KT.

- The aluminium segment report EBIT loss of Rs2.11 bn, largely due to higher alumina transfer price for impacted aluminium segment profitability.

- Alurnote facility is still operating at 50% utilisation, given the current scenario timing remain uncertain to ramp-up to the rated capacity, as a result we believe that supply disruptions will continue in the coming months as well, which will support the alumina prices.

Valuation & outlook

- We have revised estimates higher for FY19E to Rs9.6 (earlier Rs7.5), as we revised our alumina price assumptions, due to strength in alumina supported by lower supply. We believe near term earnings likely to remain strong for the integrated players and the company who is long on Alumina (NACL), will benefit to a large extent. Besides this, improving fundamental of aluminium (widening deficit outside China) should support the aluminium prices and NACL's earnings in the coming quarter. At CMP, the stock trades at 5.1x/4.7x FY19E/FY20E EBITDA, which in our view is attractive. Hence, we reiterate our BUY rating, with an unchanged target price of Rs100.

Shares of NATIONAL ALUMINIUM CO.LTD. was last trading in BSE at Rs.69.95 as compared to the previous close of Rs. 72.25. The total number of shares traded during the day was 1153336 in over 4242 trades.

The stock hit an intraday high of Rs. 73.45 and intraday low of 69.7. The net turnover during the day was Rs. 82318746.

Source : Equity Bulls

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