National Aluminium Company Ltd
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National Aluminium Company Ltd
Incorporated in 1981, National Aluminium Company Limited (NALCO) manufactures and sells Alumina and Aluminium
KEY POINTS
Business Overview
The company is a Navaratna Central Public Sector Enterprise under the Ministry of Mines. It is one of the largest integrated Bauxite-Alumina-Aluminium-Power Complex in India and one of the largest integrated primary producers of aluminum in Asia.
Product Segments
a) Aluminium (73% in FY24 vs 65% in FY22): [2] [3] Includes aluminum ingots, wire rods, billets, strips, rolled, etc. It has added a new aluminium alloy ingot (AL59) to its product range in FY24.
Between FY22 to FY24, the aluminium sale volume increased by 3% from 4.57 Lakh MT to 4.7 Lakh MT, however, the average sales realization declined by 8% from Rs. 2,20,405 per MT to Rs. 2,01,894 resulting in revenue degrowth of 6%
b) Chemicals (27% in FY24 vs 35% in FY22): Chemicals include Calcined Alumina, Alumina Hydrate and other related products.. [8] Between FY22 to FY24, the alumina sale volume declined by 5% from 12.33 Lakh MT to 11.68 Lakh MT and sales realization also declined from Rs. 32,280 per MT to Rs. 30,830 per MT resulting in revenue degrowth of 9%.
Margin Decline
The company’s operating profit margins declined from 32% in FY22 to 22% in FY24, mainly due to the increase in raw materials cost by 42% and Power & Fuel expenses by 5% over FY22-FY24, due to an increase in the price of C. P. Coke, C. T. Pitch, Caustic Soda, Coal and Fuel oil.
Geographical Spilt
Domestic: 67% in FY24 vs 56% in FY22
Exports: 33% in FY24 vs 44% in FY22
Raw Material Availability
The company has started the operation of Utkal-D Coal mines and Utkal-E Coal mines and operationalized a Caustic Soda plant at Dahej, Gujarat in JV with GACL in FY24. In FY24, the Utkal D coal block has produced 2 MT of coal and replaced the costly e-auction coal.
Manufacturing Capacity & FY24 Utilization
1) Alumina Refinery- 22.75 Lakh MTPA, 93% utilization
2) Aluminium Smelter- 4.6 Lakh MTPA, 100% utilization
3) Bauxite Mine- 68.25 Lakh MTPA, 110% utilization
4) Thermal Power Plant- 1200 MW
5) Wind Power Plant- 198.4 MW
It has captive coal mines at Angul to meet the coal requirement of the power plant.
Expansion Projects
The company is adding a fifth stream to its alumina refinery, set for commissioning by September 2025, increasing the refining capacity to 31 Lakh MTPA. In June 2024, it secured a 50-year mining lease for the Pottangi Bauxite mines, with 75 million tonnes of mineable reserves, from the Odisha State Government, aiming to obtain all clearances within 3-4 months. The company is investing ₹8,254 Cr in these two capital expenditure projects.
It is also setting up a smelter expansion project of 5 Lakh MTPA capacity at Angul for a capex of Rs. 17,000 Cr.
Alternative Sourcing
The company plans to source bauxite for the fifth stream expansion of the alumina refinery from the Pottangi Mines. However, it has also implemented measures for alternate sourcing of bauxite from the existing Panchpatmali Mines South Block. To support this, the company is setting up a crushing and conveying system with an estimated capital expenditure of ₹483 Cr, scheduled for completion by May 2025.
MoU
The JV company KABIL & Argentina’s CAMYEN SE signed an exploration and development agreement in January 2024 for 5 lithium mines in Argentina, with a project cost of Rs. 200 Cr. It has also signed MoUs with CSIR-NGRI to collaborate in the field of geophysical investigations for ongoing projects and activities in critical and strategic minerals and with CSIR-IMMT for technical & knowledge cooperation for Critical Minerals.
Focus
The company has a corporate plan with a 3-year action plan, 7-year strategy, and 15-year vision to boost revenue and profitability. To counter the commodity cycle's impact, it focuses on core business expansion, forward integration, downstream facilities, selective diversification, and backward integration for raw material security.
The scrip traded around ₹202.00 @ 10 Jan 2025
Overall:
While the long-term prospects for NALCO seem positive, the short-term outlook is more cautious. The stock might face some headwinds due to falling alumina prices and market volatility. However, the new leadership and potential for growth could lead to a price appreciation towards the target of ₹255.80
Despite the inherent risks and challenges, the long-term outlook for NALCO stock appears positive. The company's strong fundamentals, growth potential, and favorable industry trends suggest that it is well-positioned to create value for shareholders in the long run.
New Delhi
Email: cmfinanc@gmail.com
Note: we can change our views during Market Hours looking in to the direction.
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