Hindalco vs Nalco: Aluminium is the second most used metal in the world. India is the 6th largest producer of aluminium in the world with a share of around 5.3% of the global aluminium output. This makes the aluminium industry hard to be ignored. Here we compare the top 2 Aluminium companies i.e. Hindalco vs. Nalco. Let us find out which of these 2 heavyweights are worth investing in!
Aluminium is a lightweight metal that is silver in appearance and makes up approximately 7% of the earth’s crust. However, India has a very important role to play as it is the 4th largest producer of aluminium. This means that the industry plays a very important role in the Indian economy.
The aluminium industry in India is currently undergoing various changes. As investors it is very important that we take not of these particularly in this case!
The Mines Ministry in India has brought forward several changes which are expected to further increase the role played by the industry on a global stage. The Mines Ministry has recommended a hike in the customs duty for primary aluminium. In addition to this, they have also suggested an increase in import duty on downstream aluminium.
One may assume that this wouldn’t have much effect as India already produces enough aluminium for its needs. Investors must take note that despite this India imports 15-20% of the total supply of aluminium on average. These hikes in export duties are expected to further make locally produced aluminium more attractive. This has resulted in investors paying special attention to companies in this industry over the last few days.
However, this is not the only factor providing a boost to aluminium companies in India. China is the 2nd largest producer of aluminium. Over the last few months, the country’s aluminium production has decreased resulting in an increased import of Aluminium in the country.
This decrease is due to new environmental norms put in place which has hampered the operating activities of smelters. Both these occurrences bring new opportunities to Aluminium producing companies in India.
Hindalco Industries was founded in 1958 by Aditya Birla Group in Uttar Pradesh. Today the company is headquartered in Mumbai and was renamed Hindalco in 1989. Being one of the oldest companies in the sector, it has also made its mark in the world. Hindalco is one of the world’s largest aluminium rolling companies and also one of the largest producers of aluminium in Asia.
Founded in 1981. NALCO stands for National Aluminium Company Limited and is a government company. Nalco has diversified operations when it comes to mining, metal and power. By global standards, the company is the lowest cost producer of metallurgical grade alumina and Bauxite in the World.
Hindalco vs Nalco: Financial Metrics
Revenue 20172018201920202021 Hindalco100,183115,182130,542118,144131,985 (Revenue growth in %)-14.97%13.33%(-9.55)17.71% Nalco7,5439,50911,4998,4718,955 (Revenue growth in %)-26.06%20.92%(-26.33)5.71%
In FY21, Hindalco earned a revenue of Rs 1,31,985 Cr whereas Nalco was able to earn Rs 8,955 Cr. However considering the huge difference in the sizes of the company, comparing their annual revenues would not offer a clear picture.
Here let us take a look at the potential offered by the two companies through their ability to increase revenues over the last few years. Here both the company’s revenues have suffered in 2020 which is a trend noticeable in most of the companies.
However, it is important to note that over the last five years, from 2017 to 2021, revenue for Hindalco has grown at a CAGR of 7.05%. Revenues of Nalco hasn’t maintained a consistent rise in revenues.
Profits Profits (Rs in Cr) 20172018201920202021 Hindalco1,9076,2075,4943,7635,177 (Hindalco growth in %)-325.48%(-11.48%)(-31.05%)5.41% Nalco6,681,3421,7321,381,299 (Revenue growth in %)-200.89%29.06%(-92.03)941%
When it comes to profits both the companies have achieved negative growth over the last few years. Hindalco’s profits have decreased from Rs. 5494 cr in 2019 to Rs. 5177 cr in 2021.
This gives the company a 3-year negative CAGR of -8.68%. The company’s net profit margin has been on a downward trend since 2018 and currently stand at 2.63% as of 2021.
Nalco on the other hand has also seen a decrease in its profits. Its profits have decreased from Rs. 1732 cr in 2019 to Rs. 1299 in 2021.
The company however has maintained its profitability margins over the years. As of 2021, the company had a Net profit margin of 14.51%.
Returns to Shareholders Return ratios (Rs in Cr) 20172018201920202021 Return On Equity (ROE) Hindalco4.1211.099.556.455.23 Nalco6.5412.7716.531.3612.16 Return On Capital Employed (ROCE) Hindalco8.359.059.977.868.59 Nalco8.509.9922.401.9610.45 Earnings Per Share (EPS) Hindalco9.2227.3024.6716.9415.66 Nalco2.976.949.070.736.97 Dividend Payout Ratio (DPR) Hindalco12.894.404.855.8919.12 Nalco81.0582.0961.88376.6149.74
On a comparative basis, Nalco has provided better returns when it comes to dividends.
The company has a dividend yield of 4.26% whereas Hindalco on the other hand has a dividend yield of only 0.56%. Nalco and Hindalco have provided an ROE of 12.6% and 5.33%.
In this article, we looked at the financials of Hindalco vs Nalco. Both the companies are giving neck-to-neck competition with each other in terms of revenue, growth, and profitability.
The future leadership will be decided based on what strategies they choose to move forward. That’s all for this post. Happy investing! Which company would you invest in? Let us know in the comments below!
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