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Market Movers: Why NALCO’s future is brighter than what most investors think

MUMBAI: One of the country’s leading aluminium manufacturers, National Aluminium Corporation, reported June quarter earnings that drew sharp gasps of surprise from investors and not in a good way.

The company’s earnings were a disaster contrary to expectations despite the tailwinds the commodity sector has seen in the recent past. At the time, the company’s management suggested that better days lay ahead. Kotak Institutional Equities believes they indeed do.

The brokerage firm today upgraded the stock to a “buy” from a “sell” and upped its price target for the stock by 25 per cent to Rs 100. The price target implied that the stock can rise as much as 27 per cent from Thursday’s closing price.

Kotak Equities’ optimism flows from its view that the global aluminium market will be in deficit, meaning supply will be lower than the demand, which should firm up international prices of the commodity. Now since NALCO’s earnings are sensitive to aluminium prices, it could end up making a killing in the coming year.

Kotak Equities also has a benign view on another major issue for investors – the funding of new capital expenditure plans. Kotak Equities believes that the cash generated from the strong earnings should be enough to take care of the new capex plan.

Little help, tall gains

Sudarshan Chemicals saw its stock get locked in the 20 per cent upper circuit limit after a little help from the government. The government notified that it was imposing anti-dumping duty on pearl pigments imported from China after Sudarshan Chemicals itself asked the foreign trade authorities to investigate the damaging effect of Chinese imports on Indian manufacturers.

The government’s investigation found that indeed Chinese imports were hurting the prospects of the domestic industry as they were being sold at a lower price. The result of the import duty is expected to be meaningful for Sudarshan Chemicals’ bottomline going ahead. Investors thought as much as they hurried to buy the stock.

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