Nalco Q3 Results Review — Peak Margins Benefiting From Alumina Prices; Systematix Maintains 'Buy'

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Systematix Report

National Aluminium Company Ltd.’s fifth stream 1mtpa alumina refinery expansion project in Damanjodi has achieved over 70% physical progress and is now expected to be commissioned by September-December 2025 with commercial production expected to commence in the beginning of CY27.

Full ramp-up of the Utkal D&E coal blocks would help meet more than 50% of its coal requirement through captive sources. These projects not only equip Nalco with backward integration and cost efficiency but also provide notable growth drivers. Nalco currently sells around 1.3mt alumina externally through third-party exports after meeting the smelter requirement of around 0.9mt.

We estimate 1.32mt/1.77mt external alumina sales in FY26E/FY27E assuming incremental alumina refining capacity achieves 50% utilization level in FY27. Our alumina price assumption is built at 17% of LME aluminium prices, in line with the long-term average.

Current alumina prices of $530/tonne are at ~20% of aluminum price and we believe the markets and prices would move to attain a sustainable balance.

We revise our FY25/FY26/FY27 Ebitda by +23%/-46%/-28% factoring in-

1. a sooner-than-expected stabilization of alumina prices,

2. a potential two to three month delay in commissioning of the 5th stream refinery, and

3. moderate utilization of the expanded capacity in FY27.

We value Nalco five times FY27E EV/Ebitda (5.5x FY27E EV/Ebitda earlier), with a revised target price of Rs 264/share.

We believe the recent stock price correction has largely followed the broader market movement, discounting Nalco’s performance more than warranted, making it a suitable entry point at an attractive valuation of 3x FY27E EV/Ebitda. Maintain Buy.

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