Vedanta, Hindalco just got upgraded by JP Morgan: How Iran war may benefit these 2 metal stocks

Global brokerage firm JP Morgan has upgraded Hindalco Industries and Vedanta to overweight from neutral, betting that the escalating West Asia conflict will keep aluminum prices elevated and deliver substantial earnings growth to both Indian metal producers over the next several quarters.

The upgrade sent shares of both companies surging on Tuesday, with Hindalco climbing 4% to Rs 964.75 and Vedanta rallying 3% to Rs 708.85 on the BSE.

The Wall Street bank raised its price target for Hindalco to Rs 1,125 from Rs 875, implying 20% upside from the previous closing, and lifted Vedanta's target to Rs 850 from Rs 680, representing 22% potential gains.


"The Middle East conflict has put us on the edge of a bullish supply-driven event horizon and recent smelter outages will likely last for months even after shipping through the Strait of Hormuz eventually returns," JP Morgan wrote in a note.

The brokerage moved its LME aluminum price forecast for FY27/28 to $3,250/$3,150 per tonne from $2,850 previously, closer to the current spot price of around $3,540.

Hindalco, Vedanta valuations attractive

JP Morgan said valuations have become compelling, with current stock prices for Hindalco and Vedanta implying an LME aluminum price of around $2,900 per tonne, well below the spot price of $3,500.

"We see substantial earnings growth from higher LME Al prices and favorable FX (INR depreciation) over the next several quarters," the bank said, adding that commodity tailwinds should help ease recent debt concerns at both companies.

For Vedanta, JP Morgan said the risk-reward has turned attractive with FY27 estimated EBITDA trading at roughly 4x. "Earnings tailwinds in Aluminum and Zinc business should more than offset the weakness in oil and gas volumes," the note said.

Hindalco's Novelis Turnaround

The brokerage believes earnings have bottomed for Novelis, Hindalco's US-based aluminum rolling subsidiary. While energy inflation could pose a near-term headwind, "FY27 should fare much better as the Oswego plant restarts operations and the benefit of higher scrap spreads translates into better profitability," JP Morgan said.

Hindalco will also benefit from an improved earnings trajectory in its copper business, given the surge in sulphuric acid prices, a byproduct of copper smelting, the bank added.