The brokerage has upgraded its recommendations on both stocks to “overweight” from “neutral” and increased their price targets, implying up to 22% upside.
The West Asia conflict is likely to keep aluminum prices higher for longer, the brokerage said in its note, adding that it sees substantial earnings growth from higher aluminium prices on the London Metal Exchange (LME), and rupee depreciation.
JPMorgan also added that the Iran war has created a supply deficit due to recent smelter outages. However, the commodity cycle tailwinds should help ease recent debt concerns for these companies and the recent correction has also made valuations attractive for these stocks, as per the note.
It added that the current stock prices for Hindalco and Vedanta imply an LME aluminium price of $2,900 per tonne compared to the spot price of $3,500 per tonne.
Hindalco
JPMorgan has increased Hindalco’s price target to ₹1,125 per share from ₹875 apiece. This implies an upside of 20% from its previous close.
The brokerage believes earnings have bottomed for Hindalco’s unit Novelis. It also sees better profitability for Novelis as the Oswego plant restarts operations and due to the benefit from higher scrap spreads.
JPMorgan has projected an improved earnings trajectory for the firm’s copper business as well, given the surge in sulphuric acid prices.
Vedanta
JPMorgan has also increased its price target on Vedanta to ₹850 per share from the previous ₹680 apiece. This implies a 22% upside from its previous closing price.
The brokerage said the risk-reward for Vedanta has become attractive with the estimated Enterprise value to earnings before interest, tax, depreciation and amortization (EBITDA) for the financial year 2027 being 4x. It added that earnings tailwinds in the aluminium and zinc business should more than offset the weakness in oil and gas volumes.
Stock performances
Of the 31 analysts who have coverage on Hindalco, 12 have a “buy” rating, 13 have a “hold” rating and six have a “sell” rating. Meanwhile, 14 analysts have coverage on Vedanta with 11 “buy” recommendations and three “hold” ratings.
Shares of Hindalco and Vedanta ended the previous session 1.15% and 0.3% up at ₹926.75 apiece and ₹689.5 apiece, respectively.
Also Read: Jubilant Foodworks reports muted like-for-like growth in Q4; stock in focus
