On Tuesday, RBC Capital Markets adjusted its stance on Norsk Hydro (OTC:NHYDY) SA shares, downgrading the rating from Outperform to Sector Perform, while also reducing the price target slightly from NOK 77.00 to NOK 76.00. The revision by RBC Capital comes after Norsk Hydro's stock displayed a notable performance, outstripping the broader sector with a 5% gain since the beginning of the year, largely driven by robust aluminum prices.
Marina Calero at RBC Capital remarked on the factors influencing the downgrade, noting that the firm anticipates the current tightness in the alumina market to relax in the latter half of the year. This anticipated shift is expected to lessen the cost support for aluminum and potentially lead to a 7% decline in aluminum prices from the current spot levels.
Despite the downgrade, RBC Capital acknowledged Norsk Hydro's strong points, specifically its appealing valuation and leading cost position within the industry. These attributes are seen as providing a buffer against potential downturns. However, following the recent positive re-rating of the company's stock, RBC Capital now views the outlook for Norsk Hydro as more balanced.
The adjustment in the price target to NOK 76.00 is attributed to revised estimates for raw material costs and extrusion margins. RBC Capital's analysis suggests a more conservative stance on Norsk Hydro as the market dynamics for aluminum evolve in the coming months.
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