Nuvama and Motilal Oswal have initiated coverage on Vedanta Aluminium with 'Buy' ratings, citing strong earnings growth and cost reduction initiatives as key drivers.
New Delhi, India Jul 10, 2026 ALN: Nuvama Institutional Equities has initiated coverage on shares of Vedanta Aluminium Metal with a 'Buy' rating and a target price of Rs 540 per share, indicating an upside potential of nearly 22% from the stock’s previous closing price. This optimistic outlook comes amid a broader analysis of the aluminium market dynamics, which are expected to influence the company's performance in the coming years.
The brokerage emphasized that Vedanta Aluminium Metal is the fastest-growing primary aluminium company in India, with its EBITDA expected to compound at an impressive rate of 29% over the fiscal years 2026 to 2028. This growth trajectory is underpinned by several factors, including anticipated stability in aluminium prices, which Nuvama forecasts will remain firm until FY28. The firm believes that supply tightness, which has characterized the market, is likely to ease in the latter half of FY28, potentially leading to a more balanced market.
Recently, aluminium prices saw a significant correction, dropping from $3,800 per ton to $3,060 per ton. This decline was attributed to a subsiding initial surge in prices, which was driven by rising expectations of eased traffic at the Strait of Hormuz and the resumption of supply from West Asia. The Strait of Hormuz is a crucial maritime chokepoint for global oil and gas shipments, and any developments in this area can have far-reaching implications for commodity prices, including aluminium. However, the actual impact of these developments on the aluminium market remains to be fully assessed.
“Fundamentally, the aluminium market remains in deficit until H1 FY28, which is likely to keep aluminium prices firm,” Nuvama noted. “We believe full restoration of supply from West Asia will occur by Q2 FY28, and with additional supply from Indonesia, the global aluminium market could shift to surplus in FY29.”
Nuvama is factoring in a London Metal Exchange (LME) aluminium price of $3,200 and $3,000 for FY27 and FY28 respectively, indicating that while prices may fluctuate, the overall trend is expected to be favorable for producers like Vedanta Aluminium.
In its analysis, Nuvama highlighted that Vedanta Aluminium is on track to reduce its cost of production, which is a critical factor that will help profitability exceed historical averages. The company recorded an average hot metal cost of production (CoP) of $1,914 per ton over the period from FY22 to FY26. Looking ahead, this cost is projected to fall to less than $1,600 per ton on a structural basis starting from FY28. Such a reduction in production costs is vital for maintaining competitive pricing and enhancing profit margins.
Nuvama anticipates a reduction of $162 per ton in hot metal CoP by FY28 compared to FY26. This significant decrease can be achieved through several strategic initiatives, including a ramp-up of captive alumina production to meet around 87% of the company's requirements in FY28. Additionally, the commencement of the 9 million ton per annum (mtpa) Sijimali bauxite mine in the third quarter of FY27 and the phased commissioning of approximately 40 mtpa captive coal capacity from Q3 FY27 to FY29 are expected to contribute to this cost reduction.
This planned cost reduction is anticipated to enable Vedanta Aluminium to sustain a high EBITDA of over $1,100 per ton. The brokerage projects that higher production volumes, supported by stable aluminium prices and lower costs, will drive an EBITDA compound annual growth rate (CAGR) of 29% over FY26 to FY28, culminating in an EBITDA of $419 billion (with an EBITDA per ton of USD 1,560) in FY28. This growth, coupled with lean capital expenditure, is expected to enhance free cash flow, leading to deleveraging, with net debt projected to decrease from Rs 375 billion in FY26 to Rs 34 billion in FY28.
In a similar vein, Motilal Oswal Financial Services has also initiated coverage on Vedanta Aluminium with a ‘Buy’ rating and a target price of Rs 540 per share. The firm is forecasting strong earnings growth and cash flow generation over the medium term, aligning with Nuvama's bullish outlook on the company.
Motilal Oswal described Vedanta Aluminium as India’s largest pure-play primary aluminium company and the third-largest aluminium producer globally, excluding China. This positioning is critical as it highlights the company’s substantial scale and influence within the global aluminium market. The brokerage emphasized Vedanta Aluminium as one of the most compelling structural stories in the global aluminium sector, noting its industry-leading scale, extensive backward integration, and a multi-year earnings growth trajectory.
According to Motilal Oswal, Vedanta Aluminium is uniquely positioned to benefit from both favorable industry dynamics and company-specific structural drivers. The company is approaching a significant “earnings inflection point” with expected EBITDA growth of over 18% CAGR from FY26 to FY28. This anticipated growth reinforces the broader sentiment within the investment community regarding Vedanta Aluminium's potential for profitability and market leadership.
The shares of Vedanta Aluminium were listed on stock exchanges at Rs 522 apiece on June 15, following a major demerger that resulted in four new companies emerging from Vedanta. This demerger was a strategic move aimed at unlocking value and enhancing operational efficiencies within the newly formed entities. At its debut, the company’s market capitalization exceeded Rs 2 lakh crore, surpassing the total market capitalization of its parent company, which is a noteworthy achievement in the context of the competitive landscape of the Indian stock market.
However, the stock experienced a decline of around 15% in less than a month, closing at Rs 443.80 apiece on Thursday. This drop can be attributed to a variety of market factors, including investor sentiment and broader market trends. Following the positive brokerage calls from Nuvama and Motilal Oswal, the shares rose more than 3.5% on Friday, trading at Rs 459.4 apiece. This rebound reflects the market's responsiveness to analyst recommendations and the overall optimism surrounding Vedanta Aluminium's future prospects.
The outlook for Vedanta Aluminium appears promising, with both Nuvama and Motilal Oswal projecting significant growth in earnings and profitability. As the company continues to implement its strategic initiatives aimed at cost reduction and efficiency improvements, it is poised to capitalize on favorable market conditions in the aluminium sector. Investors will be closely monitoring the developments in the aluminium market, as well as the company's operational performance, to gauge its long-term potential.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own and do not represent the views of the publication.)
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