Could India’s largest pure-play aluminium company be entering its next growth phase? That is the question many investors are asking. The brokerage house Motilal Oswal initiated coverage on Vedanta Aluminium with a ‘Buy’ rating and a target price of Rs 540 per share. This indicates an upside potential of around 20% from the current market price.

According to Motilal Oswal report, Vedanta Aluminium is at an important stage of its growth journey following the demerger of Vedanta. 

The company, now operating as Vedanta Aluminum Metal (VAML), has emerged as India’s largest pure-play primary aluminium producer and the third-largest aluminium producer globally, excluding China.

Let’s take a look at the investment rationale driving Motilal Oswal’s recommendation –

A new company with a bigger growth roadmap

The brokerage house Motilal Oswal in its report noted that the demerger has created a focused aluminium business that is expected to benefit from both industry trends and company-specific growth drivers.

“The company has emerged as one of the most compelling structural stories in the global aluminum space, combining industry-leading scale, extensive backward integration, and a multi-year earnings growth trajectory,” added Motilal Oswal.

Motilal Oswal believes this positioning gives the company a stronger platform to expand production, improve profitability and strengthen its market position over the coming years.

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Earnings expected to accelerate

One of the key reasons behind the positive outlook is the expected improvement in earnings.

As per the brokerage report, “Vedanta Aluminum is approaching a significant earnings inflection point, with EBITDA anticipated to post over 18% CAGR over FY26-28.”

The brokerage expects earnings growth to be supported by higher production volumes, lower operating costs and a larger contribution from value-added aluminium products, which generally offer better margins than standard aluminium.

Lower costs could become a major advantage

Motilal Oswal also highlighted the company’s increasing focus on backward integration. In simple terms, backward integration means owning more of the raw material supply chain instead of depending on outside suppliers.

“Vedanta Aluminum is pursuing full self-sufficiency in bauxite and coal, the two most critical inputs for aluminum production,” added the brokerage firm.

The report added that the company is developing its Sijimali bauxite mine and expanding captive coal production, which could significantly reduce production costs over time.

Management has also guided for further cost reductions.

Global demand and India’s consumption remain supportive

Motilal Oswal also expects favourable industry conditions.

“The global aluminum industry is entering a period of structural tightening driven by a strong demand outlook and restrained supply,” noted the brokerage house

China’s production restrictions, reduced output in Europe, sanctions affecting Russian aluminium exports and years of limited investment outside China are expected to keep global supplies tight.

At the same time, India continues to offer strong growth opportunities.

The brokerage expects domestic aluminium demand to grow steadily over the coming years, supported by infrastructure spending, electric vehicles, renewable energy projects, manufacturing expansion and rising industrial activity.

Motilal Oswal on Vedanta Aluminum: Valuation outlook

Motilal Oswal believes the stock is still reasonably valued.

The report said, “At CMP, the stock trades at 5.4 times EV/EBITDA on our FY28 estimate.”

The brokerage expects consolidated revenue, EBITDA and Profit After Tax (PAT) to grow at compound annual growth rates (CAGR) of around 11%, 18% and 23%, respectively, between FY26 and FY28.

Disclaimer: This article reports on a specific equity research report highlighting a stock recommendation, target price, and financial projections issued by an institutional brokerage house. It does not constitute personal financial advice, an endorsement, or a solicitation to buy, sell, or hold any security. Capital market investments are subject to market risks; readers are advised to consult a SEBI-registered investment advisor and thoroughly evaluate corporate filings before making any investment decisions. This disclaimer has been generated using AI to support user well-being and responsible content consumption.