Kotak Institutional Equities has downgraded its rating on state-owned aluminium producer National Aluminium Company Ltd (Nalco) to ‘Sell’ with a target price of Rs 70.

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The revised price target implies a potential downside of 17 percent from Wednesday's closing levels.

Kotak, in its report, cited unfavourable risk-reward in Nalco's stock post the recent recovery from its 52-week low.

The brokerage also said that it expects limited upside in aluminium prices and that costs pressures in the alumina division are likely to persist. A combination of these factors will mostly keep Nalco's earnings rangebound until financial year 2025.

The capex for the alumina refinery may also result in Nalco seeing negative free cashflow over a similar timeframe, which will be negative for the stock, according to Kotak's note, which further stated that at 6.5-7x EV/EBITDA for financial year 2024-25, Nalco trades at expensive valuations.

Nalco is a leading aluminium producer having integrated and diversified operations in mining, metal and power under the ownership of the Ministry of Mines and the Government of India.

The company reported a nearly 80 percent drop in its net profit for the September quarter to Rs 170 crore from Rs 748 crore in the year ago period. Its revenue declined by 2.8 percent to Rs 3,490 crore in the September quarter due to lower sales.

Shares of Nalco are trading 2.3 percent lower at Rs 82.75.