National Aluminium Company Ltd Downgraded to 'Buy' Amid Technical Softening

Quality Assessment: Strong Fundamentals Underpinning Long-Term Growth

National Aluminium remains a high-quality company with a strong fundamental base. The firm has consistently delivered positive financial results, marking nine consecutive quarters of growth. Its operating profit has expanded at an impressive annual rate of 75.57%, underscoring operational efficiency and market strength. The company’s Return on Capital Employed (ROCE) averaged 33.90%, with the half-year figure peaking at 41.36%, signalling excellent profitability relative to the capital invested.

Moreover, the company maintains a low debt profile, with an average Debt to Equity ratio of zero, which reduces financial risk and enhances balance sheet stability. Institutional investors hold a significant 32.02% stake, reflecting confidence from sophisticated market participants. National Aluminium’s market capitalisation stands at ₹62,262 crores, making it the second-largest entity in its sector, accounting for 22.69% of the total Non-Ferrous Metals industry market cap.

Long-term returns have been exceptional, with the stock delivering 68.40% returns over the past year and an extraordinary 901.18% over the last decade, vastly outperforming the Sensex’s 10.60% and 255.80% returns respectively over the same periods. This consistent outperformance highlights the company’s ability to generate shareholder value over multiple market cycles.

Valuation: Premium Pricing Reflects Growth Expectations but Raises Concerns

Despite its strong fundamentals, National Aluminium’s valuation metrics indicate a relatively expensive stock. The company trades at a Price to Book (P/B) ratio of 3.1, which is above the average historical valuations of its peers in the aluminium and non-ferrous metals sector. Its Return on Equity (ROE) stands at 30.8%, a high figure that partly justifies the premium but also suggests elevated expectations priced into the stock.

The Price/Earnings to Growth (PEG) ratio is notably low at 0.2, indicating that the stock’s price growth is not fully aligned with its earnings growth, which has risen by 58.2% over the past year. This discrepancy may signal that the market is pricing in significant future growth, but investors should be cautious about potential valuation risks if growth slows or market sentiment shifts.

Financial Trend: Continued Positive Momentum with Strong Profitability

Financially, National Aluminium has maintained a positive trajectory. The company reported a Profit After Tax (PAT) of ₹4,074.57 crores for the first nine months of FY25-26, reflecting a 27.30% increase year-on-year. Its inventory turnover ratio is robust at 8.92 times for the half-year period, indicating efficient management of working capital.

These metrics reinforce the company’s operational strength and ability to convert sales into profits effectively. The low debt burden further supports financial stability, enabling the company to weather market volatility and capitalise on growth opportunities without excessive leverage.

Technical Analysis: Downgrade Driven by Shift to Mildly Bullish Signals

The primary driver behind the downgrade from Strong Buy to Buy is a change in the technical outlook. The technical grade has shifted from bullish to mildly bullish, reflecting a more cautious market stance. Key technical indicators present a mixed picture:

• MACD: Weekly readings have turned mildly bearish, although monthly signals remain bullish, suggesting short-term caution amid longer-term strength.
• RSI: Both weekly and monthly Relative Strength Index (RSI) readings show no clear signal, indicating a neutral momentum phase.
• Bollinger Bands: Both weekly and monthly charts remain mildly bullish, implying moderate upward price pressure but with limited conviction.
• Moving Averages: Daily moving averages are mildly bullish, supporting a cautiously optimistic near-term trend.
• KST (Know Sure Thing): Both weekly and monthly KST indicators remain bullish, signalling underlying momentum.
• Dow Theory, OBV (On-Balance Volume): Both weekly and monthly charts show no definitive trend, reflecting indecision among traders.

Price action has also softened slightly, with the stock closing at ₹338.90 on 24 February 2026, down 0.69% from the previous close of ₹341.25. The 52-week high remains ₹431.60, while the low is ₹140.00, indicating a wide trading range but recent consolidation near the upper band.

Short-term returns have been weaker relative to the benchmark Sensex, with the stock down 2.67% over the past week and 8.52% over the last month, while the Sensex gained 0.02% and 2.15% respectively. However, year-to-date returns remain positive at 7.71%, outperforming the Sensex’s -2.26% over the same period.

Sector Position and Market Context

Within the aluminium and aluminium products industry, National Aluminium holds a significant position as the second-largest company by market capitalisation, trailing only Hindalco Industries. Its annual sales of ₹18,098.06 crores represent 6.42% of the sector’s total revenue, underscoring its importance in the industry landscape.

The company’s strong institutional backing and consistent financial performance have placed it among the top 1% of all 4,000 stocks rated by MarketsMojo, reflecting its high-quality status and investor appeal.

Risks and Considerations

While National Aluminium’s fundamentals remain strong, investors should be mindful of valuation risks. The premium pricing relative to peers and the high ROE suggest that expectations are elevated. Any slowdown in profit growth or adverse market developments could pressure the stock’s price.

Additionally, the recent technical signals indicate a more cautious near-term outlook, with some bearish momentum emerging on weekly charts. This technical shift has prompted the downgrade in investment rating, signalling that investors should monitor price action closely and consider potential volatility.

Conclusion

National Aluminium Company Ltd continues to be a fundamentally strong and well-managed company with impressive long-term growth and profitability metrics. However, the recent downgrade from Strong Buy to Buy reflects a more tempered technical outlook and valuation concerns. Investors are advised to weigh the company’s robust financial health against the cautious technical signals and premium valuation before making investment decisions.

Overall, National Aluminium remains a compelling investment within the Non-Ferrous Metals sector, particularly for those with a medium to long-term horizon who can tolerate short-term market fluctuations.

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