Buy Vedanta Aluminium Metal; target of Rs 490: ICICI Securities

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • Volume growth: Vedanta Aluminium Metal Ltd (VAML) is expected to deliver a 9% volume CAGR over FY26–28E, driven by the BALCO expansion and higher value-added product sales.
  • Backward integration: Management targets hot metal costs of ~USD 1,550/t, with a further reduction of ~USD 100/t over the subsequent one or two quarters, driven by higher captive alumina, domestic bauxite, and coal integration.
  • Cost optimization: VAML expects to exit FY27 at an annualised EBITDA run rate of ~USD 5bn, supported by higher volumes, backward integration, and structural cost savings.
  • Domestic demand growth: Robust power, transportation, and lightweighting applications are driving domestic demand, with management expecting a global aluminium supply deficit of ~0.7mt in CY26.

Thesis Validation Checklist

  • Volume growth: Monitor the ramp-up of BALCO potline 3 and the achievement of an annualised capacity of 435kt by Mar'27.
  • Cost reduction: Track the progress of captive bauxite, alumina, and coal integration, and the resulting cost savings.
  • Domestic demand: Watch for continued growth in power, transportation, and lightweighting applications, and the impact on VAML's sales and realisations.
  • Global supply: Monitor the introduction of new supply from the Middle East and Indonesia, and its potential impact on aluminium prices.