National Aluminium Company Ltd (NALCO) – Q3 FY2025 Stock Research Report

Q3 FY2025 Results Stock Research Report

1. Company Overview

• Market Cap: ₹32,238 Cr.
• Current Price: ₹176
• Key Valuation Metrics:
  • P/E Ratio: 8.17
  • Book Value: ₹86.3
  • Dividend Yield: 4.56%
  • ROCE / ROE: 17.0% / 12.6%
• Operational Footprint:
  • Fully integrated bauxite–alumina–aluminium–power–coal complex
  • Government stake of ~51% under the Navratna banner
• Balance Sheet Strength:
  • Zero debt historically, with strong reserves (₹14,938 Cr.) supporting expansion plans
  • Recent raw material securitization (coal and caustic soda) enhances cost management

2. Q3 FY2025 Results Highlights

• Record Financials:
  • Quarterly Performance: Standalone PBT of ₹2,122 Cr. and PAT of ₹1,583 Cr., marking a 224% increase in PAT compared to Q3 FY24
  • Nine-Month Results: Cumulative PAT of ₹3,246 Cr. (up 211% YoY) and turnover rising by ~20%
• Operational Efficiency:
  • Achieved highest-ever quarterly and nine-month turnover, profit after tax, and EBITDA
  • Improved alumina and metal sales driven by better sales realization, increased production, and cost advantages (e.g. use of captive coal)
• Dividend Policy:
  • Declared highest-ever interim dividends (Rs.4/- per share on two occasions), underlining commitment to shareholder returns

(Data extracted from the Q3 conference call transcript and presentation documents ​, ​.)

3. Future Growth Plans & Expansion Strategy

• CAPEX Roadmap & Planned Expansions:
  • Alumina Refinery Expansion:
    • Expansion to a 1 MTPA capacity expected by FY25-26
    • Ongoing “5th stream” projects with CAPEX ~₹5,677 Cr. and ~70% completion reported
  • Bauxite Mines Expansion:
    • Pottangi mines expansion to add 3.5 MTPA capacity, with CAPEX around ₹1,961–2,200 Cr., to be commissioned by FY25-26
  • Aluminium Smelter & Captive Power Plant:
    • New smelter expansion of 0.5 MTPA projected for FY29-30, supported by a 1,200 MW captive power plant (CAPEX ~₹13,000 Cr. for power and ~₹17,163 Cr. for smelter), to be potentially financed through a mix of internal funds and debt
• Strategic Advantages:
  • Integrated operations and geographic proximity of assets (refinery, mines, CPP) reduce logistics and raw material costs
  • Raw material securitization and consistent production capacity underpin cost competitiveness
  • Expansion projects are expected to drive incremental capacity – with estimates suggesting an addition of approximately 5 lakh tons of metal production translating into revenue increases in the range of ₹11,000–12,000 Cr. annually once fully commissioned

(Expansion and CAPEX details are based on management’s discussions during the Q3 call and presentation slides ​, ​.)

4. Long-Term Financial Projections & Return Outlook

• Near-Term (Next 5 Years):
  • Increased operational throughput and higher sales volumes from refinery and mine expansions are expected to significantly boost top-line revenue and margins
  • Incremental EBITDA improvements and cost reductions (e.g., savings from reduced caustic soda usage) may drive a robust annualized growth in profitability
• Mid to Long-Term (10-20 Years):
  • With the full rollout of the smelter and captive power projects (expected FY29-30), the company is positioned to capture downstream value through expanded metal and value-added product lines
  • Conservative estimates based on incremental capacity and revenue projections indicate the potential for enhanced returns, making the stock attractive from a multiple expansion viewpoint given its low P/E and strong dividend yield
  • Although exact figures depend on execution and market conditions, the strategic expansion could support attractive compound growth in returns over the next 10, 15, and 20 years

(While specific future financial metrics are subject to operational and market risks, management’s roadmap supports a bullish medium-to-long-term outlook.)

5. Valuation & Investment Considerations

• Attractive Valuation:
  • A P/E of 8.17 and a healthy dividend yield of 4.56% suggest an undervalued stock in a capital-intensive sector
• Credit Profile:
  • The company has maintained a strong balance sheet with zero debt historically; however, upcoming CAPEX projects may introduce structured leverage. No significant changes in credit ratings have been disclosed, indicating stable creditworthiness for now
• Risk Factors:
  • Execution risk associated with large-scale CAPEX projects
  • Commodity price volatility (particularly alumina and bauxite prices) and fluctuations in LME aluminium pricing
  • Regulatory and environmental compliance risks inherent to mining and heavy industries

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Conclusion

NALCO’s Q3 FY2025 results reflect record performance and operational resilience. The company’s robust expansion plans—including refinery, mine, smelter, and power projects—coupled with its low valuation multiples and stable dividend policy, position it as a potentially attractive long-term investment. With strategic CAPEX deployment and integrated operations, the company is poised to deliver incremental EBITDA growth and improved returns over the next 5, 10, 15, and 20 years.

Disclaimer: This report is for informational purposes only and does not constitute investment advice. Investors should perform their own due diligence before making any investment decisions.