Vedanta Aluminium Metal shares: Nuvama expects 21% upside, 29% EBITDA CAGR likely through FY28
According to the brokerage, global aluminium prices are expected to remain supported until the first half of FY28 as the market is likely to stay in deficit despite recent price corrections
- Jul 12, 2026,
- Updated Jul 12, 2026 4:22 PM IST
Brokerage firm Nuvama Institutional Equities has initiated coverage on Vedanta Aluminium Metal Ltd (VAML), the recently demerged aluminium business of Vedanta, with a 'Buy' rating and a target price of Rs 540, citing strong earnings growth prospects, structural cost reductions and sustained strength in aluminium prices over the next few years. The target price implies 21% upside to the previous close of Rs 444.45.
The brokerage expects VAML's EBITDA to grow at a compound annual growth rate (CAGR) of 29% between FY26 and FY28, driven by higher production volumes, improving operating efficiencies and a sharp decline in production costs. The target price is based on a valuation of 6.5 times FY28 estimated EV/EBITDA and includes an expected dividend of Rs 15 per share in both FY27 and FY28.
ALSO WATCH: Metal Stocks Set To Rally? Expert Picks These Metal Sectors As Aluminium Prices Rebound
Aluminium market likely to remain favourable
According to the brokerage, global aluminium prices are expected to remain supported until the first half of FY28 as the market is likely to stay in deficit despite recent price corrections.
Aluminium prices have retreated from around $3,800 per tonne to nearly $3,060 per tonne on expectations that shipping disruptions around the Strait of Hormuz would ease and supplies from West Asia would normalise. However, the brokerage noted that a meaningful recovery in supply has yet to materialise, keeping market fundamentals favourable.
It expects supply from West Asia to fully recover only by the second half of FY28, while additional production from Indonesia could push the global aluminium market into surplus by FY29. The brokerage has assumed average London Metal Exchange (LME) aluminium prices of $3,200 per tonne for FY27 and $3,000 per tonne for FY28.
Capacity expansion to drive volume growth
VAML is expected to outperform domestic peers on production growth, supported by ongoing capacity expansion projects.
The company is currently commissioning a 435,000-tonne-per-annum aluminium expansion at its subsidiary BALCO, which is expected to increase the group's overall production capacity to 2.8 million tonnes by the end of FY27. Management also plans to debottleneck operations further, taking total capacity to 3 million tonnes annually by the end of FY28.
As a result, the brokerage expects aluminium volumes to grow at an 8% CAGR during FY26-FY28, reaching approximately 2.86 million tonnes.
Backward integration to reduce production costs
The brokerage believes VAML is entering a phase of structural cost improvement through greater backward integration across its raw material and energy supply chain.
It expects the company's hot metal cost of production (CoP) to decline to below $1,600 per tonne by FY28 from $1,749 per tonne in FY26. The reduction is expected to be driven by higher utilisation of captive alumina, the commissioning of the 9 million tonne per annum Sijimali bauxite mine from the third quarter of FY27 and phased commissioning of nearly 40 million tonnes per annum of captive coal capacity through FY29.
Captive alumina is expected to meet around 87% of the company's requirement by FY28, up from 62% in FY26, significantly lowering raw material costs.
Strong earnings outlook and balance sheet
The brokerage expects the combination of lower costs, higher production and firm aluminium prices to lift EBITDA to around Rs 419 billion by FY28, translating into an EBITDA CAGR of 29% over FY26-FY28.
It estimates that VAML will be able to sustain EBITDA of more than $1,100 per tonne even if aluminium prices moderate to around $2,600 per tonne, well above its historical average profitability.
Strong operating cash flows and relatively modest capital expenditure are also expected to improve the company's financial position substantially. Net debt is projected to decline sharply from Rs 375 billion in FY26 to around Rs 34 billion by FY28, resulting in an estimated net debt-to-EBITDA ratio of just 0.1 times and providing ample flexibility for future expansion and shareholder returns.
Brokerage firm Nuvama Institutional Equities has initiated coverage on Vedanta Aluminium Metal Ltd (VAML), the recently demerged aluminium business of Vedanta, with a 'Buy' rating and a target price of Rs 540, citing strong earnings growth prospects, structural cost reductions and sustained strength in aluminium prices over the next few years. The target price implies 21% upside to the previous close of Rs 444.45.
The brokerage expects VAML's EBITDA to grow at a compound annual growth rate (CAGR) of 29% between FY26 and FY28, driven by higher production volumes, improving operating efficiencies and a sharp decline in production costs. The target price is based on a valuation of 6.5 times FY28 estimated EV/EBITDA and includes an expected dividend of Rs 15 per share in both FY27 and FY28.
ALSO WATCH: Metal Stocks Set To Rally? Expert Picks These Metal Sectors As Aluminium Prices Rebound
Aluminium market likely to remain favourable
According to the brokerage, global aluminium prices are expected to remain supported until the first half of FY28 as the market is likely to stay in deficit despite recent price corrections.
Aluminium prices have retreated from around $3,800 per tonne to nearly $3,060 per tonne on expectations that shipping disruptions around the Strait of Hormuz would ease and supplies from West Asia would normalise. However, the brokerage noted that a meaningful recovery in supply has yet to materialise, keeping market fundamentals favourable.
It expects supply from West Asia to fully recover only by the second half of FY28, while additional production from Indonesia could push the global aluminium market into surplus by FY29. The brokerage has assumed average London Metal Exchange (LME) aluminium prices of $3,200 per tonne for FY27 and $3,000 per tonne for FY28.
Capacity expansion to drive volume growth
VAML is expected to outperform domestic peers on production growth, supported by ongoing capacity expansion projects.
The company is currently commissioning a 435,000-tonne-per-annum aluminium expansion at its subsidiary BALCO, which is expected to increase the group's overall production capacity to 2.8 million tonnes by the end of FY27. Management also plans to debottleneck operations further, taking total capacity to 3 million tonnes annually by the end of FY28.
As a result, the brokerage expects aluminium volumes to grow at an 8% CAGR during FY26-FY28, reaching approximately 2.86 million tonnes.
Backward integration to reduce production costs
The brokerage believes VAML is entering a phase of structural cost improvement through greater backward integration across its raw material and energy supply chain.
It expects the company's hot metal cost of production (CoP) to decline to below $1,600 per tonne by FY28 from $1,749 per tonne in FY26. The reduction is expected to be driven by higher utilisation of captive alumina, the commissioning of the 9 million tonne per annum Sijimali bauxite mine from the third quarter of FY27 and phased commissioning of nearly 40 million tonnes per annum of captive coal capacity through FY29.
Captive alumina is expected to meet around 87% of the company's requirement by FY28, up from 62% in FY26, significantly lowering raw material costs.
Strong earnings outlook and balance sheet
The brokerage expects the combination of lower costs, higher production and firm aluminium prices to lift EBITDA to around Rs 419 billion by FY28, translating into an EBITDA CAGR of 29% over FY26-FY28.
It estimates that VAML will be able to sustain EBITDA of more than $1,100 per tonne even if aluminium prices moderate to around $2,600 per tonne, well above its historical average profitability.
Strong operating cash flows and relatively modest capital expenditure are also expected to improve the company's financial position substantially. Net debt is projected to decline sharply from Rs 375 billion in FY26 to around Rs 34 billion by FY28, resulting in an estimated net debt-to-EBITDA ratio of just 0.1 times and providing ample flexibility for future expansion and shareholder returns.