Anand Rathi has recommended a `Hold` on National Aluminium Company (Nalco) with target price of Rs 387 on Jan. 27, 2010.
Nalco`s 3Q revenue rose 20% q-o-q on an increase in aluminium prices. EBITDA margin at 21% was above the 12% reported in 2Q. Lower other income and higher taxes dented the bottom line.
``Revenue rose 20% q-o-q, primarily due to a 11% increase in aluminium prices. Aluminium prices averaged USD 2,032 a ton in 3QFY10 vis-a-vis USD 1,835 in 2QFY10. We also believe higher volume and better premium to LME resulted in better than expected topline,`` said a report by Anand Rathi.
``Operating margin for the quarter, at 21%, was better than the 12% reported in 2Q. Power costs were down 10% q-o-q. We believe this could be attributed to better availability of linkage coal,`` the report added..
Net profit for the quarter at Rs 1.5 billion was flat q-o-q due to significantly lower other income (Rs 617 millio vs. Rs 1.4 billion in 2Q). Higher tax rate at 39% (adjusted for earlier provision) also lowered profit.
``We value the stock at Rs 387, based on 10x FY11e EV/EBITDA. We retain a Hold on Nalco (Q,N,C,F)* given its strong balance sheet and potential positive triggers from clarity on greenfield expansion plans,`` the broking house said.
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