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Vedanta Aluminium: Citi's Top Metal Pick with 20% Upside
18 Jun
Summary
- Citi initiates coverage with a 'buy' rating and a ₹560 price target.
- Aluminium prices are projected to rise 15-20% to $4,000 per tonne.
- Company expected to achieve a net cash position by FY2028.
Citi has initiated coverage on Vedanta Aluminium, one of Vedanta Ltd.'s demerged entities, assigning a 'buy' rating and a ₹560 price target. This target suggests a potential 20% increase from recent closing prices. The brokerage has identified Vedanta Aluminium as its premier metal pick within India.
The firm's positive outlook is driven by a favorable forecast for aluminium prices, which are expected to reach $3,400 per tonne between FY2027 and FY2028. Citi anticipates a 15-20% price increase to approximately $4,000 per tonne in the near term, driven by a current market deficit and projected inventory drawdowns.
Additional factors supporting Citi's conviction include Vedanta Aluminium's growth strategies, such as the BALCO expansion and VAL debottlenecking. The company's focus on cost optimization through higher captive alumina, domestic bauxite, and captive coal is also highlighted. Citi projects the company will achieve a net cash position by FY2028.
Citi has also placed a 90-day "positive catalyst watch" on Vedanta Aluminium, influenced by factors including increased forward demand projections. The brokerage noted that a $100 per tonne fluctuation in LME prices impacts the company's EBITDA by 4.5-5% and its fair value by ₹30 per share.
