2.85% Yield, 40% Dividends: Navratna Metal Stock Rallies On Strong Q3; Motilal Neutral, Axis Sec Upgrades

Govt-backed National Aluminium (NALCO) emerged as a star performer on February 14 with the stock rising by around 12% despite the broader market being in a see-saw-like performance. NALCO shares were among the top gainers, thanks to its robust Q3 earnings where it bagged triple-digit growth in profits. Also, NALCO has declared a dividend payout for its investors aggregating to 40%. However, brokerages gave a mixed opinion on NALCO going forward with Axis Securities upgrading the stock to buy, while Motilal Oswal being neutral.

NALCO's Share Price:

NALCO shares ended at Rs 156.10 apiece, up by 9.93% on BSE with a market cap of Rs 28,669.82 crore. On February 14th, during the trading session, NALCO gained by nearly 12% to hit an intraday high of Rs 158.90 apiece.

The Navratna stock is currently higher by 106% from its 52-week low of Rs 75.73 apiece.

NALCO Interim Dividend:

The company declared a second interim dividend of Rs 2 per share having a face value of Rs 10 each on the paid-up equity share capital of Rs 918.32 crore for the financial year 2023-24. In percentage terms, the payout is at 40%.

The PSU fixed Friday, the 23rd of February, 2024 as the 'Record Date' for payment of the above 2nd interim dividend for the financial year 2023-24.

Currently, NALCO has a dividend yield of 2.85% on the latest market price.

Earlier, the company paid an interim dividend of 20% amounting to Rs 1 per share for FY24.

NALCO Earnings:

In Q3FY24, NALCO registered a net profit of Rs. 488 crores for the 3rd quarter ended December 2023. According to the reviewed financial results for the 3rd quarter of FY 24, taken on record by the Board in the meeting held at Bhubaneswar today, NALCO has registered a significant increase of 137 % over the previous quarter of current fiscal, which was Rs 206 crore.

On the production front, NALCO has achieved strong growth with the highest ever cumulative metal production of 3,45,086 MT. Similarly, on the sales front, the company has also achieved the highest ever cumulative metal sale of 3,49,419 MT, during the first nine months of the current fiscal.

In 9MFY24, the company's net profit stood at 1044 crore as against Rs.1023 crore in the corresponding period of last year. The total income in Q3 of FY24 was Rs.3398 crores compared to Rs.3358 crores in Q3 of FY23.

NALCO Outlook:

Axis Securities upgraded its recommendation on NALCO to BUY.

In its note, the brokerage said, "NALCO reported a strong set of numbers with Revenue/EBITDA/PAT beating ours and consensus estimates. Revenue at Rs 3,347 Cr grew by 2%/10% YoY/QoQ (3% beat vs. our estimate). EBITDA stood at Rs 773 Cr (up 68%/95% YoY/QoQ) a 39% and 59% beat against our consensus led by lower RM (down 26%/10% YoY/QoQ), power & fuel (down 23%/19% YoY/QoQ) and employee expenses (down 6%/3% YoY/QoQ). The company has declared an interim dividend of Rs 2/sh bringing the total interim dividend to Rs 3/sh for FY24. The record date for the 2nd Interim dividend is fixed at 23rd Feb'24."

Further, Motilal Oswal in its research report highlighted that NALCO's JV KABIL recently signed the first exploration and lithium mining agreement with Argentina's CAMYEN SE. This will help NACL set up its presence, diversify its product offerings, and enhance the supply chain in critical and strategic minerals, which find key applications across the sectors. In addition, NACL's participation will also help in garnering the requisite technical and operational experience for Brine-type lithium exploration, exploitation, and extraction.

Until the fifth stream of alumina comes on stream, Motilal's note added, "We expect NACL to operate at full capacity, leaving little room for capacity expansion for the next two years, and the next phase of growth is expected to commence once the additional 1mt stream of alumina refinery comes on stream by Jan-May'25."

While operationalization of the Utkal D coal block would cater to ~25-28% of the coal requirement of the Angul smelter. Motilal believes this would help enhance the raw material security, which would propel the margins until the augmented capacity is on stream.

In line with NACL's 3QFY24 performance and improved outlook, Motilal increased its FY24E/FY25E/FY26E EBITDA by 19%/4%/7%. However, it added, NACL trades at 5.9x FY26E EV/EBITDA and 1.6x FY26E P/B and appears to be fully pricing in the strong outlook. We reiterate our Neutral rating on the stock with a revised TP of INR140."

NALCO has already surpassed Motilal's target price on February 14.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.