NATIONAL ALUMINIUM COMPANY LTD.

30th Oct 2021

RECOMMENDATION : BUY

MARKET PRICE : Rs.96.90 (As on 29th Oct 2021)

TARGET PRICE : Rs.117.00

FACE VALUE : Rs.5

BSE CODE : 532234

NSE CODE : NATIONALUM

National Aluminium Company Limited (NALCO) is a Navratna CPSE under Ministry of Mines. It was established on 7th January, 1981, with its registered office at Bhubaneswar. The Company is a group ‘A’ CPSE, having integrated and diversified operations in mining, metal and power. NALCO is one of the largest integrated Bauxite-Alumina-Aluminium- Power Complex in the Country.

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. NALCO has bulk shipment facilities at Vizag port for export of Alumina/Aluminium and import of caustic soda and also utilises the facilities at Kolkata and Paradeep Ports. The Company has registered sales offices in Delhi, Kolkata, Mumbai, Chennai and Bangalore and 9 operating stockyards at various locations in the Country to facilitate domestic marketing.

The Company offers products like Ingots/Sows/T-Ingots, Alloy Ingots, Wire Rods, Aluminium Billets, Flat Rolled Products such as Standard Coil, Standard Sheet, Standard Chequered Sheet. Aluminium Hydrate, Calcined Alumina, Mechanised Sows, High Speed Alloy Billets (CH 90) and more.

ABOUT THE COMPANY

Year

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YEARLY RESULTS OF NATIONAL ALUMINIUM COMPANY (in Rs. Cr.)

MAR '21 MAR '20 MAR '19 MAR '18 MAR '17

Net Sales/Income from operations 8,955.79 8,471.84 11,499.32 9,618.31 7,543.04

Total Income From Operations 8,955.79 8,471.84 11,499.32 9,618.31 7,543.04

EXPENDITURE

Consumption of Raw Materials 1,315.43 1,702.48 1,919.68 1,465.31 1,181.79

Increase/Decrease in Stocks -5.76 -365.23 -5.08 47.43 -96.59

Power & Fuel -- -- 2,927.12 2,747.92 2,212.53

Employees Cost 1,930.24 1,994.07 2,072.28 2,261.20 1,537.44

Depreciation 605.82 529.83 476.10 480.40 480.36

Other Expenses 3,933.06 4,651.29 1,692.79 1,699.00 1,628.22

P/L Before Other Inc., Int., Excpt. Items & Tax 1,177.00 -40.60 2,416.43 917.05 599.29

Other Income 146.60 272.58 325.87 299.65 408.27

P/L Before Int., Excpt. Items & Tax 1,323.60 231.98 2,742.30 1,216.70 1,007.56

Interest 7.08 5.74 2.38 1.95 2.69

P/L Before Exceptional Items & Tax 1,316.52 226.24 2,739.92 1,214.75 1,004.87

Exceptional Items -- -- -- 824.08 -40.15

P/L Before Tax 1,316.52 226.24 2,739.92 2,038.83 964.72

Tax 16.99 88.01 1,007.52 696.42 296.19

P/L After Tax from Ordinary Activities 1,299.53 138.23 1,732.40 1,342.41 668.53

Net Profit/(Loss) For the Period 1,299.53 138.23 1,732.40 1,342.41 668.53

Share Of P/L Of Associates -0.12 -2.00 1.29 -0.22 -0.81

Net P/L After M.I & Associates 1,299.41 136.23 1,733.69 1,342.19 667.72

Equity Share Capital 918.32 932.81 932.81 966.46 966.46

Reserves Excluding Revaluation Reserves 9,760.69 9,053.69 9,552.13 9,537.49 9,238.69

EPS BEFORE EXTRA ORDINARY

Basic EPS 6.97 0.73 9.07 6.94 2.97

Diluted EPS 6.97 0.73 9.07 6.94 2.97

EPS AFTER EXTRA ORDINARY

Basic EPS. 6.97 0.73 9.07 6.94 2.97

Diluted EPS. 6.97 0.73 9.07 6.94 2.97

Key

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KEY FINANCIAL RATIOS OF NATIONAL ALUMINIUM COMPANY (in Rs. Cr.)

MAR 21 MAR 20 MAR 19 MAR 18 MAR 17

PER SHARE RATIOSBasic EPS (Rs.) 6.97 0.73 9.07 6.94 2.97Diluted EPS (Rs.) 6.97 0.73 9.07 6.94 2.97Cash EPS (Rs.) 10.37 3.58 11.84 9.43 5.94Book Value [ExclRevalReserve]/Share (Rs.) 58.14 53.53 56.20 54.34 52.80Book Value [InclRevalReserve]/Share (Rs.) 58.14 53.53 56.20 54.34 52.80Revenue from Operations/Share (Rs.) 48.76 45.41 61.64 49.20 39.02PBDIT/Share (Rs.) 10.51 4.08 17.25 8.78 7.70PBIT/Share (Rs.) 7.21 1.24 14.70 6.29 5.21PBT/Share (Rs.) 7.17 1.21 14.69 10.55 4.99Net Profit/Share (Rs.) 7.08 0.74 9.29 6.94 3.46NP After MI And SOA / Share (Rs.) 7.07 0.73 9.29 6.94 3.45PROFITABILITY RATIOSPBDIT Margin (%) 21.54 8.99 27.98 17.84 19.72PBIT Margin (%) 14.77 2.73 23.84 12.79 13.35PBT Margin (%) 14.70 2.67 23.82 21.44 12.78Net Profit Margin (%) 14.51 1.63 15.06 14.11 8.86NP After MI And SOA Margin (%) 14.50 1.60 15.07 14.11 8.85Return on Networth/Equity (%) 12.16 1.36 16.53 12.77 6.54Return on Capital Employed (%) 10.45 1.96 22.40 9.99 8.50Return on Assets (%) 8.83 0.93 11.44 9.18 4.60Total Debt/Equity (X) 0.00 0.00 0.01 0.00 0.01Asset Turnover Ratio (%) 60.88 58.23 75.91 65.07 52.01LIQUIDITY RATIOSCurrent Ratio (X) 2.10 1.68 1.93 2.30 2.13Quick Ratio (X) 1.38 1.05 1.51 1.81 1.70Inventory Turnover Ratio (X) 6.07 4.99 9.50 7.96 6.53Dividend Payout Ratio (NP) (%) 35.44 205.41 48.42 67.68 81.05Dividend Payout Ratio (CP) (%) 24.17 42.01 37.99 49.84 47.14Earnings Retention Ratio (%) 64.56 -105.41 51.58 32.32 18.95Cash Earnings Retention Ratio (%) 75.83 57.99 62.01 50.16 52.86COVERAGE RATIOSInterest Coverage Ratios (%) 186.95 40.41 1,152.23 623.95 374.56Interest Coverage Ratios (Post Tax) (%) 186.95 40.41 1,152.23 623.95 374.56VALUATION RATIOSEnterprise Value (Cr.) 8,214.19 3,470.06 6,905.97 10,178.28 12,454.05EV/Net Operating Revenue (X) 0.92 0.41 0.60 1.07 1.65EV/EBITDA (X) 4.26 4.56 2.15 6.00 8.37MarketCap/Net Operating Revenue (X) 1.11 0.64 0.90 1.36 1.95Retention Ratios (%) 64.55 -105.41 51.57 32.31 18.94Price/BV (X) 0.93 0.54 0.99 1.23 1.44Price/Net Operating Revenue 1.11 0.64 0.90 1.36 1.95Earnings Yield 0.13 0.03 0.17 0.10 0.05

Shareholding Pattern an on Sep’21

Summary ❖ With deliverance of stellar performance in Q1 of FY22, the Company’s Net Sales grew up by 79.23% i.e. Rs.2474.55 crs in Jun’21 as compared to

Rs.1380.63 crs in Jun’20. However, the Net Profits proliferated by 1981.96% i.e. Rs.347.48 crs in Jun’21 on contrary to Rs.16.69 crs in Jun’20. Furthermore, the Statement of Changes in Equity witnessed a decrease in the Equity Capital i.e. Rs.918.32 crs in Jun’21 versus Rs.932.81 crs in Jun’20.

❖ Considering good fundamentals and healthy financials, the Company is available at a fair price of Rs.96.90 with its 52 week low at Rs.29.65 and 52 week high at Rs.127.95.

❖ Since the Promoters are holding majority stake around 51.28% as well as its fair valuations, it is fair to assume that the Management is growth oriented.

❖ The Shareholding Pattern as on Sep’21, shows the FIIs and the Other DIIs altogether own 15.55% stake. Whilst, the Mutual Fund Houses held 10.01% holdings.

❖ National Aluminium Company Ltd. is held by BHARAT 22 ETF, MIRAE MF, ABSL MF, EDELWEISS MF, SBI MF, UTI MF, KOTAK MF, IDFC MF, ICICI PRU MF, CANARA ROBECO MF, NIPPON INDIA MF, AXIS MF, QUANT MF, TATA MF, L&T MF, INVESCO MF, DSP MF, FRANKLIN TEMPLETON MF, MAHINDRA MANULIFE MF, UNION MF, BNP PARIBAS MF, BARODA MF, PRINCIPAL MF and a few more.

❖ On consolidated basis, the Company registered Return on Equity (ROE) and Return on Capital Employed (ROCE) around 12.16% & 10.45% respectively for the year ending Mar’21.

❖ For the year ending Mar’21, National Aluminium Company Ltd. has declared an equity dividend of 70.00% i.e. Rs.3.50 per equity share. The Company has a good dividend track report and has consistently declared dividends for the last 5 years.

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List of Associates / Relatives:

1. My spouse, Mrs. Priya Sharma 2. My daughter, Ms. Priyanka Sharma 3. My son, Master Priyanshu Sharma

Note: Subject Company is a company on which buy/sell recommendation or target price is given or changed in the research report.

Disclosure with regards to ownership and material conflicts of interest:

1. Neither I nor my associates / relatives have financial interest in the subject company. 2. Neither I nor my relatives / associates have actual/beneficial ownership of 1% or more in securities of the subject company, at the end of the month immediately preceding the date of publication of the document. 3. Neither I nor my relatives /associates have any other material conflict of interest at the time of publication of the document.

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