The state-run company’s profitability is seen improving in the current financial year, even though prices of aluminium could remain muted in a year in which economic expansion globally is expected to be modest at best.
The shares saw their sharpest jump in nearly three months, touching an intraday high of ₹85. 95, before closing at ₹84. 60 on the National Stock Exchange, up more than 5% from the previous close.
While the aluminium producer’s revenues fell 15% on year in the March quarter, they were betterthan expected, helped by better realisations from the aluminium and chemical segments. The operating profit and net profit, too, while lower on a year-on-year basis, were above analysts’ estimates helped by lower employee and power costs.
The focus of the company will now be on the early completion of the 5th stream refinery project and the development of the Pottangi Bauxite mines and the Utkal D & E coalblocks in Odisha, its senior management said.
The alumina refinery will add 1 million tonnes of capacity to Nalco’s existing capacity of 2. 2 million tonnes, and will procure bauxite from the Pottangi mine. The Utkal D block, which has a capacity of 2 million tonnes each year, has commenced production in April.
“We believe commissioning of 5th stream of alumina refinery andcommencement of operations at Utkal D & E coal blocks would further aid volume growth in alumina segment and lower power cost for Al division,” ICICI Securities said.The brokerage sees profitability rising to 22% by 2024-25 (Apr-Mar) from 20. 9% currently and has upgraded the stock’s rating to ‘add’ from ‘hold’ earlier, while raising its target price by nearly 9% to 86 rupees.
Motilal Oswal Securities, too, raised its target price to ₹90, as it sees raw material security and robust demand in India aiding the company’s earnings.
Kotak Institutional Equities, though, said that the expansion of the refinery could be return-dilutive, and sees earnings remaining stagnant between 2023 and 2026 on account of volumes remaining stagnant and commodity prices being sluggish. It also sees free cash flow remaining negative over this period.