National Aluminium Company Ltd (Nalco) is the only Government company remaining in the aluminium sector. In the case of the Government sticking to its disinvestment programme this company too could be on the blocks by the end of 2001. Although FY01 results are impressive the company seems to have suffered a hiccup in 4QFY01.
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YoY basis the company has registered sales growth similar to its competitor Hindalco. Both the companies seem to have benefited from higher aluminium prices in the current fiscal. However, with a slowdown in the global economy, led by U.S and Japan, non-ferrous metal prices have weakened on the London Metal Exchange (LME) during the quarter ended March '01. This could have impacted sales growth in 4QFY01. Also, the sales growth in 4QFY00 was significant, which could be affecting growth of the quarter announced.
Better realisations and cost control seems to have helped the company report higher operating profits and margins in the three preceding quarters. Consequently, higher OPM in the first three quarters enabled the company to report a 300 basis points hike in margins for FY01, which contributed to the growth in operating profits. However, there has been a sharp drop of 12.2 percentage points in OPM for 4QFY01. Again this could be due to weakening aluminium prices for the quarter and a significantly better performance in 4QFY00.
Although interest costs have increased significantly for the fiscal year 2001 in 4Q the company has managed to pulled down interest expenses. The growth in other income has helped further propel the company's post tax profits.
At Rs 60 the company is trading on a multiple of 6.1x 4QFY01 annualised earnings and 5.9x FY01 earnings.
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