Rising global aluminium demand, governments infrastructure development plans, housing for all schemes, and promotion of EVs are the key demand drivers that will potentially benefit the stock

43% returns in 1 year—Why National Aluminium's stock ranks high on analyst list

The PSU, with diversified operations in mining, metals and power, is expected to report robust numbers for the December 2024 quarter with revenue and PAT projected to grow at 39.1% and 205% respectively on a year-on-year basis, according to the consensus estimates of analysts compiled by Reuters-Refinitiv. Higher aluminium and alumina prices, rupee depreciation and stable input costs will aid the performance.

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Supply shortages amid the refinery shutdown at Rio Tinto and closure of Alcoa’s Kwinana refinery along with Bauxite supply issues from Guinea have fuelled the alumina prices. In the December quarter, the alumina and aluminium prices surged by 107% and 17% year-on-year, according to data sourced from an Axis Securities report. Going forward, the global aluminium supply growth is expected to trail demand. This coupled with lower power and fuel costs amid high captive coal usage will continue to support profitability.

A JM Financial report (released in December 2024) expects aluminium market to slip into a deficit in 2025, which will provide support to the prices. Limited growth potential in China, inadequate expansions outside China and lower spreads for aluminium players. leading to production cuts are some of the reasons mentioned by the report for a likely market deficit.

The company operates a captive bauxite mine, alumina refinery, smelter plant and coal-based captive power plants. It is a beneficiary of the rising global demand for aluminium that is driven by its properties such as fire-proof, lightweight, and recyclability. Sector-wise transportation, construction, packaging and electrical sectors will drive most of the demand.

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In the domestic market, the government’s infrastructure development plans, including the metro rail network and aluminium-bodied Vande Bharat trains, housing for all schemes, and promotion of EVs are the key demand drivers. The company’s 2023-24 annual report expects India’s aluminium market to grow at a CAGR of 7.6% from 2024 to 2030 and will reach $19.76 billion by 2030.

The company’s capex plans include multiple projects, such as the ramp-up of the Utkal D coal block, the 5th stream 1mtpa alumina refinery expansion at Damanjodi, and the development of the Pottangi bauxite mine. Analysts expect a huge improvement in profitability after these projects are commissioned.

Some of the management initiatives to boost growth include expansion in core business, forward integration through value addition, downstream facilities, selective diversification, and backward integration for raw material security.

The stock has significantly outperformed the market benchmark in the last one year with 43% returns compared to BSE Sensex with 5.3% returns.

Selection methodology: We pick the stock that has shown the maximum increase in ‘consensus analyst rating’ during the past three months. The consensus rating is arrived at by averaging all analyst recommendations after attributing weights to each of them (1 for strong buy, 2 for buy, 3 for hold, 4 for sell, 5 for strong sell). An improvement in consensus analyst rating indicates that the analysts are getting bullish on the stock. Only stocks with more than five analysts covering them are considered. You can see similar consensus analyst rating changes during the past week in ETW 50 table.

This story originally appeared on: India Times - Author:Faqs of Insurances