NALCO (Q4 FY13)

India Infoline News Service | Mumbai |

The company reported a 10.3% yoy growth in revenue to Rs18.7bn on the back of jump in alumina sales volume.

CMP Rs35, Target Rs44, Upside 25.2%

  • NALCO managed to report strong numbers during the quarter on the back of lower power costs and higher alumina sales. The company reported a 10.3% yoy growth in revenue to Rs18.7bn on the back of jump in alumina sales volume. Alumina sales during the quarter increased by 44% qoq and 16.5% yoy to 0.32mn tons. The increase in alumina sales was due to a combination of higher production and lower internal consumption for aluminium. Aluminium production was lower during the quarter leading to an increase in external sales. Sales of previous quarter inventory aided the growth in alumina sales. Aluminium production declined 2.4% qoq and 6% yoy to ~98,000 tons on account of lower availability of linkage coal from Coal India.
  • On a segmental basis, alumina division revenue increased 17.7% qoq to Rs7.09bn led by higher alumina sales. Revenue from aluminium business decreased 3% qoq to Rs12.4bn on account of lower aluminium production. Aluminium realizations increased 1.3% qoq to Rs127,038/ton. Power business revenue decreased 2.3% yoy to Rs4.8bn due to lower availability of linkage coal.
  • Operating profit for the quarter stood at 4.2bn, higher by 131% qoq and 37.5% yoy and above our estimate of Rs1.7bn. The jump in operating profit was due to lower power costs and increase in sales of alumina. Power costs as a % of sales declined from 34.6% in Q4 FY13 to 26.2% as aluminium production was lower and e-auction prices were lower on a qoq basis. EBIT from the alumina division jumped 60.5% qoq to Rs2bn due to higher alumina sales.
Cost Analysis
  Q4 FY13  Q3 FY13 % qoq Q4 FY13  Q3 FY13
Material costs 16.3 17.7 (134) 18.9 (257)
Power and Fuel costs 26.2 34.6 (839) 28.5 (233)
Personnel Costs 15.3 17.1 (182) 14.3 96
Other overheads 19.6 19.9 (25) 21.1 (145)
Total costs 77.4 89.2 (1,179) 82.8 (539)
Source: Company, India Infoline Research
We believe that the worst is behind us and the company has formed a bottom in profitability in Q2 FY13. An increase in alumina sales coupled with lower raw material costs and marginal improvement in metal prices would improve margins for the company. We expect OPM to improve drastically from Q2 FY13 levels to 12.3% in FY14 and 12.5% in FY15. We estimate operating profit to remain flat at Rs9.4bn in FY14. With no major capex over the next two years, we estimate cash levels to increase from Rs49bn at the end of FY12 to Rs60bn by FY15. At the CMP, the company is trading at 4.8x FY14 EV/EBIDTA and 4.1x FY15 EV/EBIDTA, which is at huge discount to its historic average and is also lower than its international peers. We do not see much downside from the current price and recommend a BUY rating with a 9-month price target of Rs44.
Results table
(Rs m) Q4 FY13  Q3 FY13 % qoq Q4 FY12 % yoy
Net sales 18,673 16,928 10.3 17,845 4.6
Material costs (3,051) (2,993) 1.9 (3,374) (9.6)
Power and fuel costs (4,889) (5,852) (16.5) (5,089) (3.9)
Personnel costs (2,854) (2,895) (1.4) (2,556) 11.7
Other overheads (3,662) (3,361) 8.9 (3,759) (2.6)
Operating profit 4,216 1,827 130.8 3,067 37.5
OPM (%) 22.6 10.8 1179 bps 17.2 539 bps
Depreciation (1,361) (1,231) 10.5 (1,232) 10.4
Interest - (2) - (8) -
Other income 1,190 1,127 5.6 1,594 (25.3)
PBT 4,046 1,720 135.2 3,421 18.3
Tax (1,585) (531) 198.7 (1,239) 27.9
Effective tax rate (%) 39.2 30.9
36.2
Adjusted PAT 2,460 1,189 106.8 2,182 12.8
Adj. PAT margin (%) 13.2 7.0 615 bps 12.2 95 bps
Reported PAT 2,460 1,189 106.8 2,182 12.8
Ann. EPS (Rs) 7.6 3.7   106.8 3.4   125.6
Source: Company, India Infoline Research

Segmental Results
  Q4 FY13  Q3 FY13 % qoq Q4 FY13  Q3 FY13
Sales (Rs mn)

In %  Sales Contribution (%)
Chemicals 8,350 7,097 17.7 45.5 42.5
Aluminium 12,424 12,789 (2.9) 67.7 76.6
Electricity 4,764 4,878 (2.3) 26.0 29.2
Less: Intersegment Rev (7,187) (8,063) (10.9) (39.2) (48.3)
Total 18,352 16,701 9.9

 




EBIT (Rs mn)

In %  EBIT contribution (%)
Chemicals 2,038 1,269 60.5 50.4 73.8
Aluminium 597 (215) (377.0) 14.8 (12.5)
Electricity 871 138 529.0 21.5 8.0
Others 541 528
BSE 77.15 [0.25] ([0.32]%)
NSE 77.10 [0.35] ([0.45]%)

***Note: This is a NSE Chart

 

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