Nalco Q2 Results Review - Broad-Based Beat Fueled By Favorable Pricing: Motilal Oswal

Motilal Oswal Report

The recent exploration and lithium mining agreement with Argentina’s CAMYEN SE, will help National Aluminium Company Ltd. establish its presence, diversify product offerings, and enhance the supply chain for critical and strategic minerals.

Until the fifth stream of alumina comes on stream, we expect Nalco to operate at full capacity, leaving little room for capacity expansion over the next two years. The next phase of growth is anticipated once the additional 1mt capacity of the alumina refinery comes on stream by May-25.

The Utkal D coal block will fulfill ~25-28% of the coal requirements for the Angul smelter. This will enhance raw material security and boost the margins until the augmented capacity comes on stream.

Owing to its robust performance in H1 FY25, we raise our revenue/Ebitda/ adjusted profit after tax estimates by ~9/27%/32% for FY25, while broadly maintaining our FY26/FY27 estimates.

We foresee H2 FY25 revenue/Ebitda and APAT to grow 17/24/30% YoY on account of favorable pricing, especially of alumina.

At current market price, Nalco trades at 6.9 times on EV/Ebitda and 1.8x on P/B and appears to be largely priced in at current levels. We reiterate our Neutral rating on the stock with a revised target price of Rs 240, valuing it at 7.5x Sep’26 EV/Ebitda.

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