Citi Maintains 'Buy' on Vedanta Aluminium Stock as Global Supply Deficits Fuel Potential Rally

Citi Maintains 'Buy' on Vedanta Aluminium Stock as Global Supply Deficits Fuel Potential Rally​

Vedanta Aluminium Metal Ltd faces investor caution despite its post-listing slump, yet a strong underlying fundamental thesis continues to support the company. Citi has initiated a positive catalyst watch on the newly listed stock, maintaining a ‘buy’ rating and setting a target price of Rs 560 per share. This bullish outlook suggests significant upside potential for the pure-play aluminum producer.

Analyst Outlook Targets 20% Upside Driven by Aluminum Price Strength​

The maintained 'buy' rating from Citi projects an approximate 20 percent upside from the stock’s Wednesday closing price of Rs 467. Currently, the market capitalization of Vedanta Aluminium stands at around Rs 1.8 lakh crore, positioning it as one of the most valuable entities carved out from the broader Vedanta Ltd group. The target implies that a correction is possible following its listing volatility.

The company debuted on June 15 at Rs 522 per share, significantly exceeding market expectations which generally ranged between Rs 420 and Rs 450. However, subsequent trading has seen investors book profits, with the stock declining about 10.5 percent over the past three trading sessions.

Structural Undersupply Underpins Future Price Trajectory for Aluminium​

Citi attributes its optimism to persistent global aluminium supply deficits, stating that market weakness is temporary. The brokerage expects aluminum prices to eventually rise from current levels of approximately $3,400 per tonne. This rebound is supported by long-term price forecasts set by the firm.

Citi specifically projects aluminium prices to average around $3,700 per tonne in calendar year 2027 and reach $3,800 per tonne by calendar year 2028. The brokerage believes that supply recovery for the structurally undersupplied market could take anywhere between six and 18 months.

Vedanta Aluminium's Strategic Position and Growth Potential​

As a standalone entity created by the demerger, Vedanta Aluminium provides investors with direct exposure to one of India’s largest aluminium producers. This separation from the larger conglomerate is expected to allow for independent valuation and appeal to sector-focused investors. The aluminum business represents the largest share of value unlocked through the group's restructuring exercise.

The potential benefits are directly tied to higher prices on the London Metal Exchange (LME). Vedanta Aluminium stands out as one of the four businesses resulting from the demerger, cementing its stature in the market. Furthermore, aggressive expansion plans have been outlined by Chairman Anil Agarwal.

Future Capacity Expansion Catalyzes Investor Confidence​

Vedanta’s leadership has detailed ambitious growth trajectory for the aluminium business operations. The company currently produces around 3 million tonnes of aluminium capacity. Over the next three to three-and-a-half years, this capacity is targeted to double up to 6 million tonnes. The long-term goal set by the management is reaching a substantial 10 million tonnes.

For investors monitoring the stock, the critical determining factor remains the trajectory and stabilization of global aluminium prices. This fundamental driver, combined with planned capacity scaling, forms the bedrock of Citi’s bullish recommendation on Vedanta Aluminium.