Vedanta Aluminium shares in a sweet spot, says ICICI Securities; initiates coverage with Buy rating

Domestic brokerage ICICI Securities has initiated coverage on the recently demerged Vedanta Aluminium Metal (VAML) with a 'Buy' rating and a target price of Rs 520, implying an upside of over 19% from the current market price of Rs 435.

According to the brokerage, Vedanta Aluminium is well positioned to benefit from a favourable aluminium cycle as the industry undergoes a structural transformation. It expects the metal to be supported by production disruptions caused by geopolitical conflicts, China's production cap, delays in commissioning new smelters and steady demand growth.

ICICI Securities values the company at 7x FY28E EV/EBITDA, arriving at a sum-of-the-parts (SoTP)-based target price of Rs 520. This comprises Rs 385 for VAML and Rs 135 for Bharat Aluminium Company (BALCO), in which Vedanta holds a 51% stake. The brokerage expects VAML to report EBITDA of Rs 38,900 crore in FY28, implying a 24% CAGR over FY26-FY28E, with EBITDA per tonne rising to $1,429, an 11% CAGR.


ICICI Securities expects aluminium volumes to increase to 2.9 million tonnes by FY28, translating into a 9% CAGR over FY26-FY28E. It believes the ramp-up of captive alumina, bauxite and coal mines will reduce input cost volatility and generate incremental cost savings of around $70 per tonne during the period.

According to the brokerage, VAML is entering a structural earnings upcycle, supported by higher volumes, greater backward integration and an improving product mix. With major capital expenditure projects largely complete and aluminium prices expected to remain supportive, the company is likely to generate strong cash flows, significantly reduce debt over the next few years and fund its next phase of expansion from FY29 onwards.

The brokerage has assigned a 10% premium to VAML relative to its peer group, citing its superior volume growth prospects and the benefits of backward integration.

In June, Vedanta Aluminium had announced plans to double its production capacity to 60 lakh tonnes per annum (LTPA) to cater to rising demand from the infrastructure, automotive and electrification sectors.

However, the domestic brokerage highlighted key risks, including a decline in aluminium prices, higher raw material and energy costs, which could weigh on earnings. A slowdown in the global economy could also dampen demand from the construction, automotive and industrial sectors.

VAML commenced trading as an independent listed entity on both the NSE and BSE in mid-June at Rs 527/share, following the completion of Vedanta Group's demerger.

Vedanta Aluminium currently accounts for around 50% of India's aluminium production and serves customers in more than 60 countries. The company operates one of the world's largest alumina refineries at Lanjigarh and one of the world's largest aluminium smelters at Jharsuguda, both in Odisha, as well as Bharat Aluminium Company Limited (BALCO) at Korba in Chhattisgarh.