28 June 2021
4QFY21 Results Update | Sector: Metals
Motilal Oswal values your support in the
Asiamoney Brokers Poll 2021 for India
Research, Sales, Corporate Access and
Trading team. We
request your ballot.
TP: INR93 (+16%)
Beneficiary of higher aluminum prices
Retain Buy on strong earnings outlook
Nalco (NACL)’s 4QFY21 result was strong, led by higher LME prices and
lower costs. It reported EBITDA of INR9.4b (+118% QoQ) and PAT of
INR6.3b (+162% QoQ).
We raise our FY22E/FY23E EBITDA estimate by 43%/27%, factoring in
higher aluminum prices, which should support strong cash flows and a good
dividend payout. Maintain
Revenue / EBITDA / Adj. PAT was up 19%/118%/162% QoQ to
INR28.2b/INR9.4b/INR6.3b (+3%/49%/63% v/s our estimate).
The beat on EBITDA was led by better-than-expected costs, partly owing to
the reversal of renewals purchase obligations – as per the notification
issued by Odisha Electricity Regulatory Commission – booked under other
expenses. Employee cost was down 11% QoQ to INR4.31b and other
expense 31% QoQ to INR2.8b.
The company has opted for the new tax regime, thus reversing its deferred
tax liabilities by INR4.23b – leading to net tax credit of INR0.97b during the
quarter. Adjusted PAT, thus, stood at INR6.3b (+162% QoQ; +63% v/s est).
FY21 rev / EBITDA / adj. PAT stood at INR89.5b/INR17.8b/INR9.9b
(+6%/+2.6x/+6.0x YoY). OCF/FCF stood at INR22.0b/INR9.8b (v/s –
It reported EBIT at INR5.9b (up 273% QoQ). Revenue rose 19%
QoQ to INR19.4b on higher LME (USD2,093/t; +9% QoQ) and higher
volumes. Aluminum production was up 10% QoQ to 112kt.
Revenue (including inter-segment) stood at INR12.1b (+23%
QoQ). EBIT came in at INR2.96b (+65% QoQ). Alumina external sales rose
10% QoQ to 378kt.
With spot LME aluminum hovering at ~USD2,450/t+ (up ~10% YTDFY22),
the near-term profitability outlook is strong. Alumina prices have not yet
reacted to the strength in aluminum and could surprise positively in FY22.
With integrated mining operations, NALCO is the best play on higher LME
Given the tight demand-supply scenario, we expect aluminum prices to
remain strong. Although, prevailing higher inventory could limit a further
upside. We factor in LME prices of USD2,300/USD2,150 per tonne for
The management has announced a 1mtpa alumina refinery expansion at
capex of ~INR64b and expects to complete the project in FY23. Given the
slow execution, however, we expect commissioning by FY24.
We value the stock on an SoTP basis at 5x FY23E EV/EBITDA and a 0.75x
book value for growth CWIP to arrive at TP of INR93. At CMP, it provides an
attractive dividend yield of ~6%. Maintain Buy.
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
147 / 2
82 / 29
Higher LME and lower costs boost EBITDA by 118% QoQ
Financials & Valuations (INR b)
2021 2022E 2023E
89.6 115.1 112.1
17.8 31.1 28.0
9.9 19.5 16.6
EBITDA Margin (%)
19.9 27.0 25.0
Cons. Adj. EPS (INR)
EPS Gr. (%)
629.4 96.5 -14.8
58.2 63.5 68.0
9.7 17.5 13.8
11.7 21.7 16.3
35.3 49.9 49.8
Div. Yield (%)
Shareholding pattern (%)
FII Includes depository receipts
Valuation and view
Amit Murarka - Research analyst
Basant Joshi - Research analyst
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.