Goldman Sachs Initiates Neutral Rating on Noranda Aluminum (NOR)

Goldman Sachs is out with a research report this morning, where their analysts initiated a Neutral rating on shares of Noranda Aluminum Holding Corp. NOR; they have a six-month price target of $9.50. GS analysts said, “We initiate on Noranda Aluminum with a Neutral rating and a 6-month target price of $9.50, implying 19% upside. Noranda’s vertically integrated structure and LME independent power contracts make it highly levered to aluminum prices which we believe will remain rangebound in the near future. We believe that NOR’s current multiple discount to its peers, particularly on EV/EBITDA, is justifiable considering its small size and a lack of geographic diversification.” They further noted, “Noranda is a vertically-integrated single smelter operation with a limited growth opportunity. It has identified some bottlenecks that will grow its primary aluminum capacity by 5% over next 12-18 months. Aluminum is our least favorite base metal, where inventories have ballooned to the historically highest levels and industry is bogged down with overcapacity. Although we expect aluminum prices to rise over coming years, that will be driven by rising input costs, particularly higher energy prices.”