Vedanta Aluminium shares jump over 3% after Citi, Kotak initiate with Buy, see up to 29% upside. Here’s why

Shares of Vedanta Aluminium Metal rallied over 3% to their day’s high of Rs 480 on the BSE on Thursday after Citi and Kotak Institutional Equities initiated coverage on the stock with a ‘Buy’ rating and a target price of Rs 560 and 600, respectively. International brokerage Citi named the newly-listed stock its top Indian metals pick.

While Citi projects 20% upside, Kotak with a higher target forecasts an upside of 29% from current levels. The gains come after the stock dropped nearly 11% in just three days since listing. The latest target price implies an upside potential of more than 20% from the stock’s previous closing price of Rs 465.36 on the NSE.

Citi listed key drivers for its bullish call, which include a positive aluminium outlook, growth potential (Balco expansion, Vedanta Aluminium debottlenecking), cost focus (higher captive alumina, domestic bauxite and captive coal), and improving leverage. It expects the company to have a net cash position by FY28.

Expecting aluminium prices to hover around $3,400 in FY27-28, Citi explained that every $100 per ton change in LME can impact the company’s EBITDA by 4-5.5%, and subsequently fair value by nearly Rs 30 per share. “We open a 90-D positive CW: Our commodities team believes the aluminium market is in deficit and will draw inventories sharply over the next 3-6 months, driving prices up 15-20% to $4,000 per ton in base case,” it added.

Kotak on Vedanta Aluminium shares

Kotak Institutional Equities cited the company’s strong positioning as a pure-play aluminium producer. The brokerage believes Vedanta Aluminium is well placed to benefit from sector-leading volume growth, accelerating backward integration and a supportive industry environment. Capacity additions are expected to drive a volume CAGR of around 6% between FY2026 and FY2029, while greater integration across bauxite and coal mines is likely to significantly improve cost competitiveness.

Kotak estimates that the company’s backward integration initiatives could reduce costs by nearly $150 per tonne, providing a meaningful boost to profitability. It also expects a structural deficit in the global aluminium market and sustained elevated aluminium prices to support earnings growth over the medium term.
The brokerage further highlighted that strong free cash flow generation should enable rapid deleveraging of the balance sheet while creating room for higher shareholder returns.

How Vedanta Aluminium shares have been performing?

Four Vedanta Group companies that spun out from Vedanta after the demerger made their much-awaited market debut on Monday, following which the shares of aluminium, iron and steel as well as oil and gas tumbled while those of the power business soared in three days.

Vedanta Aluminium shares listed as the only large-cap stock on the list, debuting at Rs 522 apiece on NSE and surpassing its parent company in terms of market capitalisation on Monday. The stock then dropped 11% in three days to close at Rs 465.36 apiece on Wednesday.

Also Read | What’s dampening the shine of Vedanta’s new crown jewel?

What lies ahead for Vedanta Aluminium?

From a pure valuation and structural standpoint, Sunny Agrawal, Head of Fundamental Research at SBI Securities, said that Vedanta Aluminium Metal appears to offer the most compelling risk‑reward among the five entities for long-term investors.

The aluminium business has emerged as the largest and most scalable vertical within the group, benefiting from strong global demand drivers (EVs, renewables, infrastructure) and integrated cost efficiencies, which enhance margin resilience across cycles, he noted, adding that by contrast, the residual Vedanta housing the zinc-silver business (Hindustan Zinc stake + Zinc International) and base metals business offers stable cash flows and dividend yield but likely limited valuation re-rating given that much of the zinc value is already priced in.

“The other demerged entities (oil & gas, power, and iron & steel) offer cyclical upside but carry higher commodity and execution risks, especially given weaker listing traction and greater earnings volatility. Hence, on a forward SOTP basis, aluminium stands out as a structural compounder with favourable operating leverage, while the rest are more tactical or cyclical plays,” Agrawal further said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)