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Hidden Gem: Vedanta Aluminium (CMP: ₹ 445, Target Price: ₹ 600, MCap: ~₹ 1.75 lakh cr; Potential Upside: 35%)

ICICIdirect Research 24 Jul 2026 DISCLAIMER

Vedanta Aluminium Metal, a part of the Vedanta Group, is India's largest primary aluminium producer, with a smelting capacity of ~2.9 MTPA and a domestic market share of over 40% as of FY26.
The company is well positioned to capitalise on the structural growth in domestic aluminium demand, which is expected to increase from 5.6 MTPA in 2025 to 8.0 MTPA by 2030, driven by rising adoption of electric vehicles, and renewable energy sectors.
With the recent commissioning of 435 KTPA aluminium smelter capacity at BALCO and further debottlenecking will increase the total smelting capacity to ~3.0 MTPA by FY28E, we expect the company’s sales volume to grow at ~8% CAGR of over FY26-28E.  Also, the topline is supported by the company increasing its share of value-added products from the current ~71% to ~90%, thereby enhancing product premiums and improving realisations Accordingly, we expect revenue to grow at a ~16% CAGR over the FY26-28E.
It is also strengthening its backward integration through the recent commissioning of the alumina refinery to 5 MTPA, along with the upcoming commissioning of captive bauxite and coal mines. These initiatives are expected to improve raw material security, lower production costs, and enhance EBITDA/tonne to ~US$1,620 by FY28E (vs ~US$1,180 in FY26).
The company is expected to generate robust operating cash flows of ~₹30,000 crore annually from FY27 onwards, supported by incremental earnings from the expanded capacities and captive mines. Consequently, net debt is projected to decline below ₹10,000 crore by FY28E, improving the net debt-to-EBITDA ratio to ~0.2x, while sustaining healthy dividend payouts of ~₹10,000 crore annually, translating into a dividend yield of ~7%.
We maintain a positive view on Vedanta Aluminium, supported by its market leadership, capacity-led volume growth, increasing backward integration, expanding value-added product mix, and industry-leading return ratios of more than 50%.
Within our metal’s coverage universe, Vedanta Aluminium remains our top pick, trading at an inexpensive valuation of ~4x FY28E EV/EBITDA. We believe the current valuation does not fully reflect its earnings growth potential, improving cost competitiveness, and strengthening balance sheet. These structural growth drivers position the company to deliver sustained earnings growth over the medium term.
We assign a BUY rating on Vedanta Aluminium with a target price of ₹600 i.e., 7x on FY28E EV/EBITDA
 

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