The brokerage initiated coverage with a “buy” rating on the stock and a price target of ₹540 per share, indicating an upside of 20% from its previous close. In a bull case scenario, the brokerage has a target of ₹680 apiece, which implies an upside potential of 51% from its previous closing price.
Vedanta Ltd.’s demerger created Vedanta Aluminium Metal, India’s largest pure-play primary aluminum company and the third-largest aluminium producer globally, excluding China.
The brokerage said Vedanta Aluminum is uniquely positioned to benefit from both favourable industry dynamics and company-specific structural drivers.
It is approaching a significant earnings inflection point, with its EBITDA anticipated to post more than 18% compound annual growth rate (CAGR) over FY26-28, Motilal Oswal said, adding that this growth will be driven by three simultaneous factors: volume expansion, structural cost reductions and an increasing contribution from value-added products.
Additionally, the global aluminium market is experiencing structural tightening due to China’s production cap, supply disruptions in Europe and Russia, and years of underinvestment outside China. This is further supported by India’s robust demand growth and substantial opportunity for import substitution, the note said.
Motilal Oswal said that at the current market price, the stock trades at 5.4 times its enterprise value/EBITDA on its FY28 estimates.
The brokerage believes the transition towards becoming more captive and backward integrated will support a structural re-rating of valuation multiples for Vedanta Aluminium.
The key risks include execution risks, aluminium price volatility, input cost inflation and trade-related challenges, the brokerage added.
Bull case scenario
Motilal Oswal has set a price target of ₹680 per share for the stock, in a bull case scenario.
The brokerage said in this scenario, LME aluminium sustains near $3,000 per tonne over FY27-29, underpinned by the CHina production cap and geopolitical supply disruption.
The timely ramp-up of captive coal mines ahead of schedule, as well as full backward integration with the bauxite mine, will reduce hot metal cost of production to $1,640 per tonne by FY28.
The production could reach 2.9 MT by FY28 as debottlenecking at Jharsuguda yields incremental output.
With the EBITDA improving by $500 per tonne to $1,650 per tonne from FY26, it is expected to result in a 31% CAGR, reaching ₹43,400 crore in FY28 with the balance sheet nearing net-debt-free ahead of schedule, the brokerage added in its bull case scenario.
Stock reaction
Shares of Vedanta Aluminium Metal are trading little changed but off the lows of the day, currently trading 0.2% higher at ₹451.8.
Also Read: HSBC says Indian IT valuations are near the bottom as AI impact peaks in FY27
