Reviews

In this edition, we have reviewed National Aluminium Co. Ltd. and Shree Digvijay Cement Co. Ltd. We suggest our reader-investors to HOLD National Aluminium Co. Ltd. and Shree Digvijay Cement Co. Ltd.





We had recommended National Aluminium Company (NALCO) in Volume 37, Issue No. 07 dated February 28 to March 13, 2022 under the ‘Analysis’ segment. The recommended price for the stock was ₹115.35. We had recommended the stock on the basis of strong liquidity position, good demand growth and high returns on capital employed. NALCO is a Schedule ‘A’ Navratna CPSE that was founded in Bhubaneswar on January 7, 1981. Currently, the Government of India owns 51.28 per cent of the paid-up equity. 
 

NALCO is the country’s first public sector company to enter the foreign market in a large way with a London Metal Exchange (LME) registration dating back to May 1989. Looking at the financials as regards the company’s Quarterly Results, net sales were recorded at ₹3,289.98 crore in Q3FY23 as compared to ₹3,773.26 crore in Q3FY23. The operating profit for the quarter Q3FY23 stood at ₹526.09 crore as opposed to ₹1,262.51 crore. The net profit for the quarter also witnessed de-growth and it stood at ₹273.85 crore in Q3FY23 while in Q3FY22 it was recorded at ₹830.86 crore. In terms of its annual performance, net sales were at ₹4,180.81 crore in FY22 as compared to ₹8,955.79 crore in FY21, posting an amazing gain of 58.34 per cent. 
 

The operating profit has seen an extraordinary increase of 149.54 per cent and stood at ₹4,814.58 crore in FY22 while in FY21 it was at ₹1,929.42 crore. As a result, the net profit for FY22 stood at ₹2,951.97 crore, recording a gain of 127.16 per cent in contrast to ₹1,299.53 crore in FY21. The 1 MTPA capacity expansion of the alumina refinery is targeted to be commissioned by January 2024. However, with less than 5 per cent capex spent till FY22, the commissioning is likely to be delayed and could exceed the initial capex estimate of ₹6,436 crore as per the December 2018 price level. NALCO received approval for its mine plan for Utkal D and E coal blocks in February 2022.
 

End-user demand pick-up from China along with the Federal Reserve pivot will decide the price trajectory of aluminium from the current uncertainty. With the correction in thermal coal prices, the cost support to the aluminium prices could be fading further. The delay in the commissioning of the coal blocks and probable cost overruns at the alumina refinery expansion also need to be taken into account. Hence, we recommend HOLD.


 

We had recommended Shree Digvijay Cement Company (SDCC) in Volume 37, Issue No. 07 dated February 28 to March 13, 2022 under the ‘Low Price’ segment. The recommended price for the stock was ₹64. We had recommended the stock on the basis of high-capacity utilisation and the company being one of the pioneers in cement manufacturing along with sustained growth expectation. In 1944, the firm established operations in Gujarat’s Jamnagar district. Today, the company’s fully automatic modern cement plant has a capacity of 12 lakh tonnes per year. Moreover, Shree Digvijay Cement Company has excellent rail and road connections. When it comes to offering excellent quality ordinary and special Portland cement, SDCC has been a pioneering innovator. The company has over 300 employees and a network of more than 1,000 channel partners distributing its cement throughout Gujarat under the brand name ‘Kamal Cement’. Analysing the quarterly performance for Q3FY23, its net sales zoomed to ₹206.44 crore as compared to ₹151.57 crore in Q3FY22, posting an increase of 36.2 per cent. The operating profit was recorded at ₹17 crore in Q3FY23 as opposed to ₹20.01 crore in Q3FY22. The net profit also saw astounding returns of 40.13 per cent for Q3FY23 and recorded a gain of ₹10.19 crore as compared to ₹7.27 crore in Q3FY22. Also, the company posted positive numbers on the annual front.
 

Its net sales witnessed a rise of 25.16 per cent YoY and stood at ₹629.34 crore as compared to ₹502.82 crore. The operating profit was recorded at ₹121.05 crore with a decent gain of 8.73 per cent as compared to ₹111.33 crore in FY21. Consequently, the net profit delivered positive results and stood at ₹55.28 crore in FY22 as opposed to net profit of ₹53.96 crore in FY21. The company has made substantial investments in its plant for stabilising the operations and plant capacity and exploring new markets. With the ramp-up of operations at increased capacity, substantial contribution in revenue and profitability is expected in the coming years.


SDCC is prioritising cost reduction strategies by implementing procurement sourcing, increasing the utilisation of eco-friendly and cost-effective green energy sources for power, exploring alternative fuel options, optimising logistics operations, controlling overhead expenses including manpower and expanding sales and marketing efforts to enhance overall performance and profitability. Hence, we recommend HOLD.