Vedanta & Vedanta Aluminium: Strong Q1 Gains Driven by Commodity Prices

Vedanta and its demerged entity, Vedanta Aluminium Metal, have delivered robust financial results for the first quarter, propelled primarily by a surge in commodity prices. Both companies are now poised for substantial capital investments, targeting future growth and enhanced market positioning.

This strong performance positions them to capitalize on an anticipated period of sustained high aluminium and base metal prices, despite currently trading at lower valuations than many industry counterparts.

Key Q1 Financial Highlights

• Vedanta Aluminium recorded a 216% year-on-year increase in net profit.
• This outpaced competitors like Hindalco, which saw 75% growth, and National Aluminium Company at 91%.
• Vedanta’s net profit surged by 152% year-on-year.
• This growth was consistent with Hindustan Zinc’s 145% and Hindustan Copper’s 163% increases.
• The average LME aluminium price rose 46% year-on-year to $3,565 per tonne in the June quarter.

Vedanta Aluminium’s Strategic Play

Vedanta Aluminium’s impressive profit surge stemmed directly from elevated aluminium prices. Analysts project these prices will remain high in the short term, influenced by several global factors.

• Supply disruptions from the US-Iran conflict.
• China’s persistent production limits.
• Delays in commissioning new smelters globally.

The company plans significant capital expenditure of around ₹5,000 crore for FY27, with ₹2,000-2,500 crore specifically for its subsidiary, Bharat Aluminium Company. This investment supports a strategy focused on increasing aluminium volume, reducing costs through backward integration into bauxite-alumina-coal, and expanding its portfolio of value-added products to bolster cash flows and earnings visibility.

Vedanta’s Broader Base Metal Performance

Vedanta’s overall profitability was boosted by high zinc and copper prices. The outlook for its base metals remains positive, with expectations for sustained high aluminium and copper prices, alongside firm zinc prices.

Growth across Vedanta’s diverse operations will be underpinned by increased volumes and strategic capacity expansions. The company has earmarked a growth capital expenditure of ₹7,000 crore for FY27, allocating ₹5,000 crore to Zinc India and ₹2,000 crore to its other businesses.

Valuations and Future Outlook

Despite these robust earnings, Vedanta’s stock currently trades at a price-earnings (P/E) multiple of 7.1, significantly lower than Hindustan Zinc’s 14.7 and Hindustan Copper’s 44.8. Vedanta Aluminium Metal also trades at a P/E of 11.8, below Hindalco’s 14.8, though it is higher than Nalco’s 10.4.

The combined capital investment of approximately ₹12,000 crore projected for FY27 by both entities underscores a clear strategy to leverage current market tailwinds and expand operational capabilities. Their relatively lower valuations, coupled with aggressive growth plans and strong commodity price forecasts, present a compelling long-term outlook for these metal giants.