Nalco Is glinting in the light
Nalco Is glinting in the light
Nalco Is glinting in the light
China has cut its aluminium production. the country is the world’s largest producer of the metal and the cuts have created a deficit in the market. as prices climb, Indian aluminum manufacturers are getting a boost. and one Indian stock, National Aluminium Company (Nalco), is especially reaping the benefits.
things are going well for Navratna PSU Nalco. it hit a 52-week high of ₹124.75 earlier this week. the company is building capacity and plans to invest ₹30,000 crore in next 6-7 years by 2027-28 FY.
why is Nalco gaining?
the metal index is gaining because of global cues. on October 18, the Nifty Metal Index rose 4% to hit an intraday record-high of 6,246.65. this was on the back of rising metal prices anticipating demand.
China is the cause for this celebration. the country is cutting down on metals like aluminium in its endeavour to reduce carbon emission by 2030. freight costs have also gone up, restricting capacity further.
this means that large players like Nalco can bridge the deficit gap quickly. the domestic situation has also improved. consumer industries are seeing demand picking up for the metal, leading to better revenues for players like Nalco.
for Nalco, the numbers are the proof. in Q1, its net profit jumped close to 2000% to ₹347.5 crore. this was because of a 79% jump in sales to ₹2,474.5 crore.
the increase in revenues happened due to a rise in volumes and better capacity utilisation. during the June quarter, the production of aluminium stood at 1.14 lakh tonnes compared to 0.98 lakh tonnes in the same period previous year.
is the momentum sustainable?
aluminum prices are expected to be on the rise for the next two years. with production controls in China, it is India’s manufacturers like Nalco that will jump in to fill the gap.
it is expected that prices of London Metal Exchange (LME) Aluminium will see a double-digit price increase in 2022 and 2023.
looking at these signs, brokerages have also upgraded Nalco’s rating. JP Morgan has updated Nalco’s rating considering the price factors.
the foreign brokerage also said that aluminium will continue to see the highest price rise among all metals between 2021-23. hence, companies like Nalco stand to benefit. China’s loss is India’s gain globally. and Nalco gets to keep the biggest piece of the pie.