YES Sec initiates coverage on Nalco with 'Add', sees 16% upside: Check TP

Nalco share price today: YES Securities values the company at 6x H1FY28E EV/Ebitda and arrives at a target price of ₹247

National Aluminium Company share price today: Domestic brokerage YES Securities has initiated coverage on National Aluminium Company (Nalco) stock, state-run aluminium producer, with an 'Add' rating, saying the company is well-positioned to benefit from volume expansion, cost-efficient operations, and supportive global pricing trends, making it a compelling long-term play in the metals space.

 

YES Securities values the company at 6x H1FY28E EV/Ebitda and arrives at a target price of ₹247. The brokerage expects NALCO's revenue, Ebitda, and profit after tax (PAT) to grow at a CAGR of 9.6 per cent, 15.5 per cent, and 15 per cent, respectively, over FY26–28E. The target price implies a 15.8 per cent upside from Wednesday's closing price of ₹213.26. 

 

On Thursday, September 18, Nalco stock fell nearly 1 per cent to hit an intraday low of ₹211.75 on the NSE.

 

At 11:20 AM, the stock was trading at ₹212.8, down 0.2 per cent on the NSE. The stock has fallen around 19 per cent from its 52-week high of ₹262.99 touched on November 25, 2024. The company's total market capitalisation stood at ₹38,966 crore.  FOLLOW STOCK MARKET UPDATES TODAY LIVE

Here's why Investec holds a positive outlook on National Aluminium:

Alumina volumes set to ramp up from FY27

According to analysts at YES Securities, Nalco is set for its largest capacity expansion in over a decade with the commissioning of its 1.0 mtpa 5th stream of Damanjodi alumina refinery by the end of FY26. Trial runs are expected to begin in Q1FY27, with full ramp-up of merchant alumina sales by FY28. Since there’s no increase in aluminium smelting capacity, the entire incremental alumina output will be available for external sales, which is a margin-accretive opportunity, especially in a supportive pricing environment. The brokerage expects alumina sales volumes to grow at a strong CAGR of 25.2 per cent over FY25–28.

Backward integration ensures cost advantage, margin stability

"With captive coal from Utkal-D & E reducing power costs and the Pottangi bauxite mine aligned to commission alongside the 5th refinery stream, the company is structurally positioned for cost advantage," the brokerage said. 

 

While bauxite leases at Panchpatmali blocks (expiring in 2029 and 2032) will require timely renewal, the integrated supply chain enhances earnings stability, even amid global input volatility, though timely renewal of existing bauxite leases remains key.

Debt-free status gives Nalco flexibility for capex-led growth

The company is entering its next growth cycle with a net-cash balance sheet, strong internal accruals, and aspirations of doubling the aluminium smelting capacity. The planned ₹17,000 crore aluminium smelter expansion is expected to be phased by CY30–31. The company can comfortably meet its annual capex needs of ₹1,700–2,000 crore through internal resources, providing flexibility to phase out large projects without financial stress. This balance sheet strength stands out, especially in a volatile commodity environment.

Global supply constraints to support prices

Despite a potential surplus in global aluminium and alumina markets, supply-side restrictions, particularly China's 45 mtpa production cap and rising ESG hurdles in Australia, are expected to keep a pricing floor in place. YES Securities expects aluminium and alumina prices to remain stable at $2,500 a tonne and $375 a tonne, respectively, over FY27–28. For Nalco, this ensures earnings protection even in a sideways pricing cycle, aided by its internal cost advantages.