National Aluminium Company (NALCO) reported strong Q2 FY27 revenue of Rs 5,419 crore, a 26% year-on-year increase. While sales volumes grew, EBITDA margins faced pressure from rising power and raw material costs. Following these results, Axis Securities maintained a 'Buy' rating but lowered the target price to Rs 355 from Rs 420, citing concerns over future aluminium prices and project execution risks.
NALCO Q2 Revenue Climbs 26% YoY to Rs 5,419 Cr
Axis Securities Reduces Target Price to Rs 355; Maintains Buy Rating
Reader Takeaway: Strong top-line growth is offset by margin pressure and revised FY28 earnings estimates due to input costs.
What just happened
NALCO reported a robust top-line performance for Q2 FY27, with consolidated revenue reaching Rs 5,419 crore, a 26% jump compared to the same period last year. The company beat brokerage revenue estimates by 13%, supported by a 6% increase in metal sales volumes to 119 Kt. However, profitability metrics showed signs of strain; EBITDA stood at Rs 2,411 crore, missing estimates by 2%, as margins contracted by 100 basis points to 44%.
Why this matters
The margin contraction highlights the impact of a 45% surge in power and fuel expenses and a 43% increase in raw material consumption. While the company is scaling up operations, investors are adjusting expectations for FY28. Axis Securities has lowered its EBITDA estimates for FY28 by 7%, citing expectations of softer global aluminium prices and potential wage inflation.
Operational and Strategic Updates
The company is nearing a key milestone with the 5th-stream alumina refinery, which is nearing mechanical completion. Integrated trials and initial production are expected by late December 2026 or early January 2027. Additionally, captive coal production from the Utkal-D block reached ~2 MT in H1 FY27, which is gradually lowering dependency on high-cost e-auction coal.
Risks to watch
Significant risks include potential capex overruns at the 5th-stream refinery, which could strain near-term cash flows. Furthermore, volatile aluminium prices and fluctuations in power costs remain primary drivers of margin uncertainty.
What to track next
The progression of large-scale capex projects, specifically the brownfield smelter expansion at Angul and the greenfield smelter project in Andhra Pradesh, will be critical for long-term growth. Investors should monitor the successful commissioning of the 5th-stream refinery as the immediate operational catalyst.