Can Nalco beat aluminium price fluctuations?

livemint.com:

Zomato-Paytm ticketing deal appetizing for both The alumina market faces significant scarcity, with July prices hovering at 22% of London Metal Exchange (LME) aluminium price, well above the normal range of 14-17%. “We remain positive on Nalco in view of the firm alumina price outlook, integrated business model, and attractive dividend yield," analysts at Antique Stock Broking said in a research report. The report projected that Nalco’s Ebitda margin would expand from 21.8% in FY24 to 30.7% in FY26.

Nalco also commissioned its captive coal block in Q1FY25. This, along with the lower market price of coal, helped reduce its largest cost item, power and fuel, by more than 25%. This coal block and another that is awaiting clearances will help the company meet nearly 60% of its coal requirement.

This would give it a significant advantage because of the high energy-intensity of the production process. The company’s capex projection stands at about ₹2,000 crore annually for the next few years, similar to FY24 when it spent ₹2,130 crore. With a cash balance of ₹2,650 crore at the end of FY24 and adequate cash flow, funding should not be an issue.

To expand its presence beyond aluminium, Nalco entered into an agreement with its joint-venture partners in January to explore and develop lithium mines in Argentina at an initial cost of ₹200 crore. Considering the importance of lithium to the green-energy transition, the agreement could significantly enhance the company’s profits if it discovers mineable reserves in these blocks. Also read: Sinking copper-gold ratio signals elevated global economic distress “The stock’s valuation has re-rated since the news and it peaked at 9.6 times its 12-month forward consensus EV/Ebitda in May