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* Revenue declined 15% YoY to INR36.7b, 18% above our estimates. The improved performance was driven by better realizations from the aluminum and chemical segment.

* EBITDA declined 53% YoY to INR7.7b, against our estimate of INR4.4b, driven by lower employee cost and power expense.

* APAT declined 48% YoY to INR5.3b, against our estimate of INR2.4b, driven by strong operating performance.

* Revenue for the chemicals business stood at INR16b (up 9% YoY), above our estimate of INR13.7b. Revenue from the aluminum vertical stood at INR25.4b (down 22% YoY), in line with our estimate of INR24.5b.

* For FY23, NACL posted a revenue of INR142b (YoY: flat), EBITDA of INR24.3b (down 46% YoY), and APAT of INR153b (down 48% YoY).

* The Chemical segment operated at a capacity utilization rate of 101.1% and produced 2.1mt of material. The smelter, on the other hand, achieved full capacity production across 960 POTs and produced over 100% at 464kt.

* The company declared a final dividend of INR1.5, taking the total dividend to INR5 for FY23.

Next leg of capex to drive growth

* NACL has achieved over 100% capacity utilization in FY23, with little room to expand production with its existing capacity.

* NACL is setting up the fifth stream alumina refinery, which will add 1mt to its existing installed capacity of 2.2mt (total capacity post expansion stood at 3.2mt).

* In order to feed the new alumina refinery, NACL is also setting up Pottangi bauxite mine (reserves of ~75mt) and Utkal D and E coal blocks with an annual capacity of ~4mt (175mt proven reserves).

* Once operational, these mines would ensure raw material security, and thereby, reduce external risks and drive long-term value creation for the stakeholders.

Valuation and view

* Demand from India is expected to be strong, on the back of higher spending by the government on infrastructure.

* In line with the recent performance, we have increased our FY24E EBITDA/APAT by 10%/9%. We have kept our aluminum LME estimates unchanged for FY24E.

* NACL trades at 3.6x FY24E EV/EBITDA and 1x FY24E P/B. We note that the current valuations are reflective of global macro headwinds. However, there remains the potential for an upside in case of an improved demand from India.

* We reiterate our Neutral rating on the stock with a revised TP of INR90, valuing the stock at 4x FY24E EV/EBITDA.

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