Nalco executes mining lease deed with Odisha government; stock gains 4.5%

Nalco share: The mines have an annual production capacity of 3.5 million tonnes and have reserves estimated at 111 million tonnes

National Aluminium Company (Nalco) share price moved higher by 4.5 per cent to Rs 195 apiece on the BSE on Friday after the public sector company executed a mining lease deed with the State Government of Odisha.

Nalco, on Thursday, said it has executed a mining lease deed with the State Government of Odisha over an area of 697.979 hectares for Bauxite Mines in Pottangi Tehsil, Koraput District.

"The mines have an annual production capacity of 3.5 million tonnes and have reserves estimated at 111 million tonnes, projecting a mine life of 32 years. Upon obtaining the remaining requisite statutory clearances, the mine is expected to become operational soon. The mined Bauxite would be transported to Nalco Refinery at Damanjodi through an overland conveyor of 18.5 kilometers," Nalco said in its exchange filing.

 

At 1:55 PM, Nalco share was trading 3.3 per cent higher at Rs 192.6 per share as against a nearly unchanged benchmark Sensex index. The stock's intraday high of Rs 195 was closer to its record high of Rs 206.3 per share, hit on May 28, 2024.

Nalco is a 'Navratna' CPSE under the Ministry of Mines, Government of India. The company is a Group 'A' CPSE having integrated and diversified operations in mining metal and power. It is engaged in the business of manufacturing and selling of Alumina and Aluminium.

In the March quarter, Nalco reported a consolidated revenue of Rs 3,600 crore, down 3 per cent year-on-year (Y-o-Y), but up 7 per cent quarter-on-quarter (Q-o-Q). Its consolidated Ebitda stood at Rs 1,100 crore, up 45 per cent Y-o-Y and 43 per cent Q-o-Q, with consolidated Ebitda margin of 30.9 per cent in vs 20.9 per cent in Q4FY23 and 23.1 per cent in Q3FY24.

Adjusted for an exceptional item of Rs 430 crore, due to the reversal of royalty expenses, Nalco's profit after tax stood at Rs 680 crore in Q4FY24, up 37 per cent Y-o-Y and 44 per cent Q-o-Q.

"Until the fifth stream of alumina comes on stream, we expect Nalco to operate at full capacity, leaving little room for capacity expansion over the next two years. The next phase of growth is anticipated to begin once the additional 1mt stream of the alumina refinery comes on stream by May’25," said analysts at Motilal Oswal Financial Services.

It has given a 'Neutral' rating to the stock, with a target price of Rs 180, owing to the improved outlook on input cost, which lifted Ebitda estimate by 6 per cent for FY25/FY26.

"On FY26 estimates, Nalco trades at 7.7x on EV/Ebitda and 2x on P/B and appears to be fully pricing in the strong outlook," the brokerage said.