Back in India, aluminium is one of the slowest growing commodities compared to 8 percent growth in copper. However, analysts feel that aluminium has grown only 4 percent in the last ten years. Even liberalisation has not stoked any major demand, the compounded annual growth rate remains around 4 percent. Aluminium demand has lagged behind even in terms of GDP growth over the last decade. Analysts do not expect a major fillip in demand and forecast a growth rate of not more than five years. Nalco, however, has only to face the above mentioned worries. Ironically, despite all these factors, some analysts are very bullish on Nalco. They feel that cash-flows will constantly be on the rise with some expecting pre-tax profit to exceed over Rs 160 billion. The valuation for Nalco done taking into consideration the replacement cost of a similar capacity, works out to be around Rs 222 to Rs 225 per share. Other valuation parameters like peer group valuation multiple for the company is also very high.
NSTL
