Vedanta Aluminium share price target: Buy VAML stock for 21% upside, says MOFSL

MOFSL on Wednesday said it remained constructive on Vedanta Aluminium Metal  (VAML) Ltd or VAML, as the Anil Agarwal-led company is well-positioned to benefit from favorable industry dynamics, company-specific structural drivers, and a valuation gap with peers. 

The domestic brokerage said Vedanta Aluminium is entering a strong earnings inflection point, where Ebidta us projected to expand at 18 per cent over FY26-28 compounded annually, supported by a multi-year earnings growth runway. The brokearge suggested a target of Rs 540 on the stock, which implied a 21 per cent potential upside over Tuesday's closing price of Rs 447.90 on BSE.

This, MOFSL said, would largely be driven by three levers: volume scale, integration-led structural cost reductions, and a rising value-added mix. 

MOFSL noted that global aluminum market is structurally tightening due to China's production cap, supply disruptions in Europe and Russia, and years of underinvestment outside China. 

"This, coupled with India's robust demand growth and significant import substitution opportunities, creates a favorable outlook for VAML. Further, the valuation gap between VAML and its peers provides an opportunity for a structural re-rating of valuation multiples," MOFSL said. 

At the prevailing price, the VAML stock trades at 5.3 times EV/Ebitda on MOFSL's FY28 estimate. The brokerage maintained a 'Buy' rating on the stock with a target price of Rs 540.

  At present, Vedanta Aluminium Metal operates 2.9 MTPA of aluminum smelting capacity across Jharsuguda (1.85 MTPA) and BALCO (1 MTPA, including the 435ktpa expansion). The ongoing commissioning of BALCO, coupled with debottlenecking at Jharsuguda, is likely to take the aggregate smelting capacity to 3 MTPA by FY28E-exit, driving 6 per cent volume CAGR till FY28, MOFSL said.

"More importantly, VAML’s competitive proposition is increasingly being shaped by vertical integration rather than capacity alone. The company has built an integrated value chain spanning bauxite mining, alumina refining, and aluminum smelting," it said.

The Lanjigarh alumina refinery has been expanded from 2 MTPA to 5 MTPA, materially strengthening internal alumina availability and reducing dependence on external procurement, MOFSL noted.

 VAML: Self-sufficient strategy 

Vedanta Aluminium's  self-sufficient strategy is centered on securing critical upstream input materials namely bauxite and coal. The company has secured a bauxite mine with 300MT reserves and five coal mines with combined reserves of 1,048 MT.

Besides, the Sijimali bauxite mine is expected to commence operations in 2HFY27 with 12mtpa capacity. Post-commissioning, VAML’s total requirement is expected to be 15mt, of which 12mt will be sourced captively and the rest 3mt procured from OMC, MOFSL said.

In the case of coal, captive coal production is expected to rise sharply from 2.6MTPA currently to over 40 MTPA by FY28-29. The strategic proximity with these mines should further reduce logistics costs and provide insulation from external raw material volatility, MOFSL said.

VAML: Captive power capacity

MOFSL said power alone contributes nearly 40 per cent of aluminum production costs, making access to competitive energy a critical determinant of long-term positioning. 

"VAML operates 4.5GW of captive power capacity and has additionally secured 1.3GW of renewable energy through long-term agreements, strengthening its energy-cost advantage. Management is targeting a further 9-12 per cent reduction in costs, with hot-metal cost of production expected to reach $1,550-1,600/t," MOFSL said. 

The domestic brokerage believes the combination of Sijimali ramp-up, higher captive coal availability, operating efficiencies, and increasing scale can drive VAML toward the top decile of the global aluminum cost curve.