Systematix Initiates Coverage on Vedanta Aluminium, Predicting Potential 28% Rally in Shares!
The initiation of coverage on Vedanta Aluminium (VAML) by Systematix Institutional Equities, accompanied by a Buy rating and a target price of Rs 598, signals strong bullish sentiment for the company, projecting a considerable 28% upside. The firm’s recent financial performance is a testament to this optimism, with consolidated net profit witnessing a remarkable threefold year-on-year increase to Rs 5,629 crore in the June quarter of FY2026. This growth is forecasted to be sustained and even accelerated through significant volume increases, efficient backward integration strategies, and a favorable demand environment for aluminium products.
A key driver of VAML’s anticipated earnings growth is the effective ramp-up of its designated projects, including BALCO, Lanjigarh, Sijimali, and its captive coal mines. The brokerage predicts VAML will see a 39% increase in Profit After Tax and a 29% uptick in EBITDA over the FY26-FY28 period, with revenue projected to grow at a CAGR of 16%. This robust outlook is premised on a substantial production boost, with aluminium volumes expected to rise from 2.46 million tonnes in FY26 to 2.77 million tonnes by FY28, underscoring the company’s capacity expansion and operational efficiencies.
The focus on backward integration, particularly in securing bauxite, alumina, and coal resources, is poised to lower operational costs and enhance VAML’s competitive edge. The brokerage projects that by FY29, captive mine output could surge dramatically from 2.6 million tonnes to 19.6 million tonnes, notably reducing reliance on external coal sources from 90% to approximately 37%. Equally, the strategic development of the Sijimali bauxite site is expected to contribute significantly to securing raw material sufficiency, thereby lessening VAML’s dependence on external procurement, which is crucial in an industry where power and raw material costs are key determinants of profitability.
Forward-looking capex plans suggest an intention to maintain growth momentum, with Rs 7,000 crore earmarked for FY27, comprising high-growth and maintenance expenditures. The gradual decrease in capital intensity and the upcoming ramp-up of production facilities should facilitate free cash flow generation, thus strengthening balance sheets through deleveraging and improved return ratios. As VAML continues to position itself as a global leader in the aluminium sector, both capacity expansions and strategic resource management will be pivotal in delivering long-term value to its stakeholders.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)