Diwali Picks 2026 : Vedanta Aluminium Metal Ltd for the Target Rs.525 by Monarch Networth Capital
Vedanta Aluminium Metal Ltd (VAML) is India's largest producer of primary aluminium and alumina, demerged from Vedanta Ltd and listed independently on the NSE/BSE on 15 June 2026. The company operates one of the world's largest single-location Aluminium smelters at Jharsuguda (1.85 mtpa), the 5 mtpa Lanjigarh alumina refinery in Odisha and BALCO's smelting and power assets at Korba, backed by ~6,230 MW of captive thermal and renewable power. It sells primary aluminium and a range of valueadded products (VAPs), including billets, wire rods, alloys and rolled products, with pricing linked to LME aluminium prices plus regional premiums. VAPs now account for ~62% of sales volumes, complemented by its low-carbon aluminium range, marketed under the ‘Restora’ brand. Key end markets include power transmission, EVs and transportation, packaging, construction and defence. In H1 FY27, its first half as a listed entity, VAML reported revenue of Rs 43,717 crore (up 43% YoY), EBITDA of Rs 20,412 crore (47% EBITDA margin) and PAT of Rs 12,784 crore (up 147% YoY).
* Strong aluminium price tailwind: LME aluminium traded in a US$3,000-3,750/t band in H1FY27 against an average of ~US$2,605/t in 2025, supported by a global supply deficit (~200kt estimated for 2026) and supply disruptions in the Gulf. Every 1% move in aluminium prices changes EBITDA by ~2%, giving strong operating leverage.
* Backward integration to cut costs: Captive coal mines (Kuraloi 8 mtpa, Ghogarpalli 20 mtpa) and the Sijimali bauxite mine (9 mtpa) are being commissioned through FY27-28, while alumina refinery utilization rises from ~70% to 90%. Management guides to a ~US$175-200/t reduction in hot-metal cost (Q2 FY27: US$1,722/t), which would place VAML in the first decile of the global cost curve and reduce its dependence on bought-out coal and bauxite.
* Volume growth and deleveraging: The new 0.435 mtpa BALCO smelter is ~25% commissioned, adding 260-270kt in FY27 with full ramp-up in FY28. With the capex cycle nearing completion, net debt fell from Rs 33,013 crore to Rs 26,442 crore in Q2 FY27 (net debt/EBITDA of 0.7x). The company paid its first interim dividend of Rs 8/share, and an expected ~40% payout implies a dividend yield of ~6% at current prices.
* Outlook & Valuation: We expect revenue and EBITDA to grow at a CAGR of 18% and 29%, respectively, over FY26-FY28E, driven by higher realisations, BALCO volumes and lower costs. Key risks include a fall in aluminium prices, delays in mine approvals and leverage at the promoter (Vedanta Resources) level. Valuing the company at 5.5x FY28E EV/EBITDA gives a fair value of Rs 525 per share (48% upside from current levels).
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SEBI Registration Number is INZ000043833
