Nalco shares up 18% in 8 days on West Asia tensions; buy or book profit? Target price

Shares of National Aluminium Company Ltd (Nalco) climbed 18 per cent in the past eight trading sessions amid firming up of aluminum prices, thanks to disruptions in West Asia, with Aluminum Bahrain declaring a force majeure due to the shipping blockade in the Strait of Hormuz and Qatalum announcing a controlled shutdown due to suspension of gas supplies. 

On Friday, Nalco shares hit a high of Rs 399.95 against Rs 338.95 level they closed at Rs 338.95 level on February 23. Nalco is amongst the lowest-cost bauxite and alumina producers, and a major exporter of alumina selling over 1.1 mtof alumina and 0.5 mt of aluminum annually. It operates at close to full capacity. The March quarter average LME spot aluminum price at $3,115 per ton is 10.1 per cent higher over December quarter's  average and 18.6 per cent over the year-ago quarter's average, Antique Stock Broking said.

"Firm aluminum prices and additional alumina volume would aid topline, while reduced bauxite mining costs, coal cost advantage, softer caustic soda prices, and rationalized employee costs would drive cost reduction and support margins. We like Nalco’s growth prospects (including its initiative to explore critical minerals), integrated operations, and net cash position," it said. 

The brokerage maintained 'Buy' rating on the stock with a target price of Rs 420, assigning a target multiple of 6 times based on estimated FY28 EV/Ebitda.

Antique Stock Broking said global alumina futures contract prices are softer than the December quarter average, thanks to  new alumina capacity in Indonesia. They are expected to recover gradually with new aluminum smelting capacity coming up in Indonesia. 

Besides, Nalco’s 1 mtpa brownfield alumina expansion is likely to be commissioned by June 2026. Nalco is targeting to increase VAP capacity with plans for a 100 ktpa wire rod mill and a 12 ktpa aluminum foil plant in the next 2–3 years.

"Firm aluminum prices and additional alumina volume would aid topline, while reduced bauxite mining costs, coal cost advantage, softer caustic soda prices, and rationalized employee costs would drive cost reduction and support margins," Antique said.