This Vedanta company still has steam left; brokerages express confidence in a potential upside of up to 22%—find out why.

Vedanta Aluminium has emerged as one of the most closely watched metal stocks after its demerger, with leading brokerage Motilal Oswal Financial Services initiating coverage with a 'Buy' rating. The brokerage believes the company is well-positioned for strong earnings growth over the next few years, driven by rising aluminium demand, lower production costs and an expanding portfolio of high-value products.

Motilal Oswal has assigned a target price of ₹540, indicating an upside potential of nearly 22% from the stock's latest closing price of ₹443.80.

Motilal Oswal Bullish on Vedanta Aluminium

According to the brokerage, Vedanta Aluminium is India's largest pure-play aluminium producer and the third-largest aluminium producer outside China. The company benefits from a large production network and increasing self-reliance in raw material sourcing, helping it maintain one of the industry's lowest cost structures.

The brokerage expects these advantages to translate into stronger profitability and higher cash flows over the coming years.

Why the Brokerage Expects Strong Earnings Growth

Motilal Oswal projects that Vedanta Aluminium's EBITDA could grow at a compound annual growth rate (CAGR) of more than 18% between FY2026 and FY2028.

The brokerage attributes this expected growth to three key factors:

Higher production capacity, leading to increased sales volumes.

Lower operating costs through improved raw material integration and operational efficiencies.

Greater contribution from value-added aluminium products, which typically generate better margins than standard aluminium products.

These factors are expected to improve both profitability and free cash flow.

Rising Aluminium Demand Strengthens Outlook

The global aluminium market is also supporting the company's long-term growth prospects.

Several international factors have tightened aluminium supply, including:

Production restrictions in China.

Supply disruptions in Europe and Russia.

Limited investments in new global aluminium capacity over the past several years.

At the same time, India's aluminium demand continues to grow, supported by infrastructure development, electric vehicles, renewable energy projects, construction and manufacturing. This demand-supply imbalance could benefit domestic producers such as Vedanta Aluminium.

Increasing Raw Material Self-Reliance

Another major positive highlighted by the brokerage is the company's strategy to become increasingly self-sufficient in securing raw materials.

Higher backward integration can reduce dependence on external suppliers, improve cost control and enhance profit margins over the long term. If successfully executed, this strategy could further strengthen the company's financial performance and shareholder returns.

Risks Investors Should Watch

Despite its positive outlook, Motilal Oswal has also identified several risks that could impact the company's growth.

Key risks include:

Delays in capacity expansion projects.

A sharp decline in global aluminium prices.

Rising raw material and energy costs.

Operational or regulatory challenges in overseas businesses.

Any of these factors could affect earnings growth and limit upside in the stock.

Vedanta Aluminium Share Performance

Vedanta Aluminium was listed on the stock exchanges on June 15 following its demerger at ₹522 per share, with a market capitalisation of over ₹2 lakh crore.

However, the stock has since corrected by around 15%, ending Thursday's session at ₹443.80. Its current market capitalisation stands at approximately ₹1.73 lakh crore.

Despite the recent decline, Motilal Oswal believes the correction offers an opportunity for long-term investors, given the company's strong business fundamentals and favourable industry outlook.