1:1 Bonus, 1:2 Split, 48 Dividends; Not Vedanta, But Navratna PSU Stock Nears 52-Week High; Emkay Says BUY

One metal stock witnessed a big rally on Thursday, October 17, 2024, so much so that it gained by nearly 6% and reached near its 52-week high levels. The stock is recommended to buy as its fundamentals are expected to bolster due to an alumina refinery project. Who is it? Not the dividend yield giant Vedanta Ltd, but a Navratna PSU stock below Rs 230 levels, National Aluminium Company Ltd (NALCO).

NALCO Share Price:

At the time of writing, NALCO shares traded at Rs 227.80 apiece, up by 4.74% on BSE, with a market cap of around Rs 41,838.47 crore. In the early trade, the stock zoomed by nearly 5.6% to hit an intraday high of Rs 229.60 apiece, which was closer to its 52-week high of Rs 232.55 apiece.

YTD, NALCO has gained by over 67% on BSE. And in a year, the stock zoomed by a whopping 128.58%.

NALCO has a strong record of dividends, splits and bonuses.

Dividends: NALCO has delivered up to 48 dividends since August 2000, as per Trendlyne data. In the last 12 months, the stock has rewarded investors with a Rs 5 dividend per share. Currently, it has a dividend yield of 2.2%.

Stock Split: NALCO has split only once and that was in March 2011. The stock split ratio was 1:2, where the face value of Rs 10 was trimmed to Rs 5 each.

Bonus Issue: Also, in March 2011, the company delivered a bonus reward of a 1:1 ratio. Simply put, NALCO gave 1 free share on the existing 1 equity share.

Emkay Says BUY:

In its latest report, Emkay Global said, "We initiate coverage on Nalco with a BUY recommendation and blended target price of Rs275/share, implying an expected total return of 26%. Our investment case on Nalco is premised on three distinct aspects that would bolster business fundamentals, and translate into solid earnings momentum over the next 2-3 years, with a doubling of EBITDA to Rs61bn by FY27E. "

Emkay believes that the market is under-appreciating the earnings potential and project delivery which it argued could be partially due to a general scepticism about PSUs.

However, Emkay also thinks that times have changed, as is evident in the re-rating of PSU equities, and that market sentiment on Nalco would start turning positive as the company delivers on profitability. Valuations appear undemanding at 7.7x FY26E EV/EBITDA. That being said, Nalco is Emkay's top pick in the Metals & Mining sector.

National Aluminium Company Limited (NALCO), a 'Navratna' company under the Schedule 'A' category of CPSEs, was founded on 7th January 1981 with its registered office in Bhubaneswar. It is one of the country's largest bauxite, alumina, aluminium and power complex. Currently, the Indian government owns 51.28% of NALCO's equity capital. The Company has been operating its captive Panchpatmali Bauxite Mines for the pit head Alumina refinery at Damanjodi, in the District of Koraput in Odisha and the Aluminium Smelter & Captive Power Plant at Angul.

The Company has a 68.25 lakh TPA Bauxite Mine & 21.00 lakh TPA (normative capacity) Alumina Refinery located at Damanjodi in Koraput district of Odisha, and 4.60 lakh TPA Aluminium Smelter & 1200MW Captive Power Plant located at Angul, Odisha.