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Execution delays; alumina spot pricing improved

National Aluminium (NACL) delivered strong operating performance with 81% YoY EBITDA growth aided by higher aluminum prices and well-controlled costs. Alumina volumes grew 14% YoY while metal volume remained flat YoY. RM and P&F inflation was negated by lower employee & other mfg expenses aided to keep metal CoP under control. Mgmt. guided for higher input costs to continue in Q2 however spot alumina prices have also improved by ~USD50/t. Aluminum NSR improved 12% QoQ to US$3,918/t with slight improvement in premium over LME, while alumina declined 7% QoQ to US$330/t. Commissioning of the 1mtpa alumina refinery has been delayed by a quarter and is now expected by end-Sep'26, with commercial production likely towards the end of CY26.

Going forward, improved alumina prices, a structurally tight global aluminum market and higher LME should continue to support earnings despite elevated raw material costs. Key monitorable remains timely stabilisation of the 1mtpa refinery, capex on 0.5mtpa smelter and 1080MW CPP projects which is planned by end 2030. Near-term profitability will largely depend on aluminium and alumina prices in absence of volumes. Mgmt. guided for improved alumina prices which are supported by lower production from Rusal and China, along with higher Guinea bauxite prices. Deficit in the aluminum market is expected to support LME prices, while continued geopolitical tensions could keep aluminum prices above US$3,100. We raise FY27/28E EBITDA by 5%/6%, assuming higher LME price for FY27E/28E at US$ 3,228/3,100 (earlier US$ 3,203/3,050) and weakened INR. Every US$100 increase in ally prices would lead to ~5% upgrade in our NACL EBITDA. At CMP, the stock is trading at 4.6x EV of FY28E EBITDA. Maintain ‘Accumulate’ with revised TP of INR 401 (from INR376, assigning same 5x EV/EBITDA multiple)

Strong pricing offsets volume constraints: Revenue grew 39% YoY to Rs53bn (+6% QoQ; PLe Rs55.9bn) on strong metal pricing. Metal volume remained flat YoY and declined 7.4% QoQ to 113kt constrained by capacities, while alumina sales volume grew 14% YoY to 347k. Alumina export volume increased 11% YoY to 305kt while domestic volumes were up 47% YoY at 43kt. Average alumina NSR declined 7% QoQ to USD330/t; average realization for metal increased 12% QoQ to US$3,918/t (premiums to average LME improved to 10% from 9.3% QoQ. Q1FY27 average LME Ally prices were up 11% QoQ while Alumina prices were up 5%.

Well-controlled costs drive margin expansion: NACL’s EBITDA grew 81% YoY to Rs27bn (+15% QoQ); higher than PLe Rs25.48bn on lower operating expenses. RM costs & power/fuel costs increased 32% YoY, while other manufacturing expenses declined 7% YoY. Employee costs too went down 11% YoY in-line with management guidance. Metal CoP works out at ~US$1,648/t for the quarter (-3% YoY & QoQ). Robust performance was supported by a favorable global aluminum price, higher production and sales volumes particularly increased domestic alumina sale. Reported PAT grew 88% YoY at Rs20bn (+17% QoQ, PLe Rs18.75bn) on strong operating performance

Segmental information: Chemicals segment (alumina) revenue declined 4% YoY to Rs15.7bn (flat QoQ, PLe Rs20.5bn) while aluminum segment revenue grew 55% YoY to Rs41.8bn on higher LME (8% QoQ; PLe Rs43.48bn). Segmental EBIT margin for alumina stood at 17.3% (down 8pp QoQ) while segmental EBIT margin for metal improved 6.9pp QoQ to 55.5% on higher LME.

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