Vedanta Aluminium: Ebitda to grow 1.7 times by FY29? 360ONE Capital shares views

In a note on Vedanta Aluminium Metal Ltd, 360ONE Capital said while the Vedanta group company expects its Ebitda to increase by two times by FY29, conservatively, it believes it can still grow 1.5-1.7 times. This growth is expected to be driven by higher volumes, cost reductions and improved net effective pricing, the domestic brokerage said. 

360ONE Capital said Vedanta Aluminium's estimated volume growth of over 20 per cent, cost reduction of 9-12 per cent, and higher LME aluminium prices are expected to be key earnings drivers. 

"Our base case assumption for LME aluminum is $ 3,150/tonne for FY27 and $ 3,000/tonne for FY28 and FY29. In our calculations, every $100 per tonne change in LME aluminium prices can impact the Ebitda by 6-7 per cent," 360ONE Capital said.

Stronger earnings are expected to improve the balance sheet, with net debt-to-Ebitda projected to decline below 1.5 times. Additionaly, the company's focus on the BALCO expansion, de-bottlenecking, reducing costs through higher captive alumina, domestic bauxite and captive coal usage, along with the expectation of achieving a net cash position by FY28, should further augment support future growth, 360ONE Capital said. 

Vedanta Aluminium shares are currently trading at an EV/Ebitda of 8.5 times. For now, 360ONE Capital does not rating the stock.

Recently, the stock received an 'Outperform' rating from CLSA as the foreign brokerage initiated the coverage on the Vedanta group firm with a target of Rs 540, citing a higher for longer aluminium cycle and robust operational tailwinds. CLSA expected Vedanta Aluminium's backward integration to lift the company into the first decile of global cost curve, along with near-term volume growth visibility. 

Another foreign brokerge Citi recently initiated coverage on Vedanta Aluminium with a 'Buy' and a target price of Rs560. It sees many drivers for Vedanta Aluminium including a positive aluminium outlook, growth potential, cost focus and improving leverage. 

Kotak Institutional Equities also initiated coverage on the stock with a "buy' rating on June 17, suggesting a fair value of Rs 600. 

"The structural deficit in the aluminium market and elevated prices should further support earnings growth. Strong FCF should drive rapid deleveraging and higher shareholder returns. We initiate with a BUY rating and a Fair Value of Rs600 (7X March 2028E EV/Ebitda)," it said.