Vedanta Aluminium Metal Ltd (VAML), the recently demerged entity of Vedanta, has received a wave of 'Buy' recommendations from leading brokerages after reporting robust Q1 FY2027 earnings. Firms like Citi, Investec, Nuvama Institutional Equities, MOFSL, and Emkay Global have all issued positive ratings, driven by favorable LME prices and strong operational volumes.
Strong Q1 Performance and Future Outlook
VAML delivered a strong first quarter for FY2027, achieving a record-high EBITDA of Rs 10,500 crore. This performance was largely in line with analyst expectations, bolstered by firmer aluminum prices and disciplined cost management. The EBITDA per ton expanded significantly to $1,797, as hot metal costs saw a sequential decline of 3 percent to $1,698 per ton. Management has reiterated its FY2027 cost guidance, aiming for $1,650-$1,700 per ton.
Brokerage Insights and Price Targets
- Emkay Global: Maintained a 'Buy' rating with a target of Rs 550. Emkay highlighted that VAML's medium-term cost reduction strategy remains intact, supported by increased captive alumina integration and the upcoming commencement of captive bauxite and coal mines, alongside the BALCO expansion. These factors are expected to drive margin expansion.
- Nuvama Institutional Equities: Reaffirmed its 'Buy' stance with a target of Rs 540. Nuvama anticipates that the operationalization of captive bauxite and coal mines in H2 FY2027 will further reduce hot metal cost of production (CoP) to below $1,600 per ton by FY2028.
- Citi: Suggested a 'Buy' on VAML, setting a target price of Rs 525 per share.
- Investec: Found the stock worthy of Rs 585 per share, indicating strong upside potential.
- MOFSL: Projected consolidated revenue, EBITDA, and PAT to grow at 11 percent, 18 percent, and 23 percent CAGR, respectively, over FY2026-2028. This growth is expected to be fueled by volume expansion, margin improvement, and an increasing contribution from downstream operations.
Key Growth Drivers: Domestic Demand and Integration
Analysts are particularly optimistic about India's long-term aluminum market. Domestic aluminum demand is forecasted to grow at an impressive 8-9 percent annually, reaching 8-8.5 million tons by FY2030. This robust demand outlook, combined with VAML's ongoing backward integration efforts and a rising contribution from value-added products, provides strong visibility for sustained earnings growth and cash flow generation over the medium term.
The company's strategic initiatives, including higher captive alumina integration and the development of its own bauxite and coal mines, are crucial for achieving its cost reduction targets and strengthening its competitive position in the market.
Disclaimer: This article provides information for general knowledge purposes and should not be considered as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.