Vedanta Aluminium shares could rise 31%; Kotak Neo sees strong earnings potential as aluminium outlook remains firm
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Vedanta Aluminium’s outlook is being shaped by expectations of slower capacity additions in Indonesia and a relatively tight global aluminium market. Higher production volumes, greater backward integration and lower costs could support operating performance and cash generation through FY27 and FY28.
Shares of Vedanta Aluminium could rise 31% from current levels, according to Kotak Neo, which retained its ‘Buy’ rating on the stock with a price target of ₹540.
The research house said the market may be underestimating the durability of the aluminium upcycle and the earnings growth potential of Vedanta Aluminium. The stock has remained below its listing levels since making its debut on the bourses in June.
Vedanta Aluminium shares were trading 1.9% higher at ₹411.90 on Friday, September 18. The stock has declined around 8% over the past month. At ₹411.90, the ₹540 price target implies an upside of around 31% for Vedanta Aluminium. The firm expects the company to benefit from stronger aluminium market conditions, higher production volumes and lower costs from greater backward integration.
The research house expects Vedanta Aluminium to deliver sector-leading volume growth while generating a free cash flow yield of 12% in FY27 and 13% in FY28. Its scenario analysis also suggests that the stock's risk-reward remains favourable even under a bearish commodity price assumption.
Vedanta Aluminium Share Price:
A key part of the investment case is the outlook for global aluminium supply. Kotak Neo said concerns over a large wave of new supply from Indonesia may be overstated, with project execution challenges likely to limit the pace of capacity additions.
The firm expects these constraints to keep global aluminium markets tight through calendar year 2028. A tighter supply environment could support aluminium prices and provide a favourable backdrop for producers such as Vedanta Aluminium.
The company is also expected to benefit from higher volumes and cost efficiencies as it expands its backward integration. These factors are expected to support earnings growth and cash generation over the next two financial years.
Vedanta Aluminium began trading separately on the NSE and BSE on June 15 following the Vedanta Group’s demerger. It debuted at ₹522 on the NSE and ₹527 on the BSE, compared with Friday’s market price of ₹411.90.
Vedanta Aluminium was separated alongside three other businesses — Iron & Steel, Oil & Gas and Power as part of the group restructuring. The stock is currently trading below both its NSE and BSE debut prices.
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This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
Rochelle Britto has spent 8+ years decoding India's markets, businesses, and consumer economy, reporting for ET Prime and Times Internet along the way, covering the stories behind the numbers.
A Mumbai native and perpetual planner of the next holiday, she stays far, far away from the eternal question, “Where are we going next?” When she's not chasing headlines, she's chasing new cultures, open roads, and a bit of quiet in nature.
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