80% Dividend: Multibagger Navratna PSU Metal Stock Nalco Jumps Amid Global Aluminium Price Surge

The shares of National Aluminium Company (NALCO) hit a new high of Rs 252.65 on Thursday, marking a 5% rise on the Bombay Stock Exchange (BSE) during intra-day trading, even as the broader market remained weak. In the past three days, the stock has surged by an impressive 15%, driven by recent developments in the global aluminium market. The company's strong performance comes amidst China's announcement to cancel export tax rebates on aluminium and copper products, effective December 1, 2024, which has sparked optimism for Indian aluminium producers like NALCO.

Despite a 0.70% dip in the BSE Sensex, which stood at 77,108 at 2:30 pm, NALCO's stock has shown remarkable resilience, continuing its upward momentum. Over the past year, the company's share price has skyrocketed by 170%, significantly outperforming the 17% rise in the BSE Sensex during the same period. The stock has delivered returns of more than 80% in 2024 alone. NALCO's shares were trading at Rs 246.38 on the National Stock Exchange (NSE), up by more than 2.5% compared to the previous day's close.

Global Factors and Price Surge

The recent surge in NALCO's stock price is primarily attributed to China's decision to revoke the export tax rebates on aluminium and copper. As the world's largest aluminium producer, this move is expected to curtail China's aluminium exports, thereby tightening global supply and driving up prices.

The London Metal Exchange (LME) saw aluminium prices spike by 8% to $2,730 per tonne following the news, signalling a positive outlook for global aluminium markets. The tightening of aluminium supply due to China's policy change aligns with India's growing demand for aluminium, positioning NALCO to capitalize on these favourable market conditions.

NALCO, a Navratna Public Sector Enterprise (CPSE) under the Ministry of Mines, Government of India, has been on a growth trajectory, with its stock price reflecting this upward movement. As of September 2024, the Government of India holds a 51.28% stake in the company. NALCO is one of India's largest producers of bauxite, alumina, and aluminium, with a total production of 0.46 million tonnes (mt) of aluminium and 2.12 mt of alumina in FY24.

The company has also posted impressive financial results for the first half of FY25, with a 199% rise in net profit, which soared to Rs 1,663 crore compared to Rs 556 crore in the corresponding period of the previous year. This performance is attributed to record domestic metal sales of 221,966 tonnes, the highest ever for NALCO in a six-month period.

Factors Driving Growth

NALCO's robust performance can be linked to a combination of global market factors and strong domestic demand. Rising alumina prices, expansion of its alumina refinery, and cost-saving initiatives like captive coal mining are expected to further drive earnings growth in the future.

In India, the demand for aluminium is forecast to remain healthy, with ICRA estimating annual growth of 9% for the aluminium industry through FY24 and FY25. This demand surge is fueled by the Indian government's massive infrastructure development plans, including projects such as the Housing for all initiative, metro rail expansions, and the construction of aluminium-bodied Vande Bharat trains. Additionally, the power transmission and distribution sector is a key consumer of aluminium, and substantial capacity expansions planned by the Central Electricity Authority will further boost aluminium demand.

Moreover, the government's target of achieving 500 GW of renewable energy capacity by 2032 will necessitate significant additions to transmission lines. NALCO's FY24 annual report highlights that growth in solar rooftop installations and large-scale capacity additions in solar module manufacturing will also contribute to the growing demand for aluminium in India, particularly in the renewable energy sector.