Vedanta, Vedanta Aluminium post strong Q1 gains as metal prices lift earnings
After their demerger, Vedanta and Vedanta Aluminium Metal have reported robust financial outcomes for the first quarter, primarily due to rising commodity prices. Both companies are eyeing substantial capital investments to propel their growth strategies. With aluminium and base metal prices expected to stay strong in the near future, they are currently valued lower than their industry rivals,…
Vedanta and Vedanta Aluminium Metal reported robust first-quarter earnings driven by soaring metal prices. The two entities, following their recent demerger, are planning to invest nearly ₹12,000 crore in capital expenditure for the fiscal year 2027. Analysts believe the stocks will attract investor attention in the medium-to-long term due to their strong balance sheets and consistent cash generation.
Vedanta Aluminium experienced a remarkable 216% year-on-year surge in net profit, outpacing Hindalco's 75% growth and Nalco's 91% growth. This surge was primarily fueled by an average LME aluminium price that climbed by 46% year-on-year to $3,565 per tonne during the quarter. The upward trend in aluminium prices is anticipated to persist, supported by US-Iran war-related supply disruptions, China's production cap, and delays in the commissioning of new smelters.
Industry experts predict that aluminium prices for FY27 will remain higher than the previous peak cycle as Gulf supplies are expected to resume at a slower pace than anticipated.
Vedanta Aluminium has earmarked ₹5,000 crore for capital expenditure in FY27, with ₹2,000-2,500 crore allocated to its subsidiary Bharat Aluminium Company. ICICI Securities views the company as a "sweet spot" as it possesses near-term growth levers alongside improved backward integration into bauxite-alumina-coal. The company aims to expand aluminium volume, optimize costs through backward integration, and boost value-added products to enhance cost reduction, cash flows, and earnings visibility.
Vedanta registered a 152% year-on-year increase in net profit during the same period, aligning closely with Hindustan Zinc's 145% growth and Hindustan Copper's 163% growth. The outlook for Vedanta's base metals remains encouraging, with aluminium and copper prices expected to stay elevated while zinc prices are likely to remain firm.
The company plans to invest ₹7,000 crore in growth capex for FY27, with ₹5,000 crore designated for Zinc India and ₹2,000 crore for other businesses. Despite the strong earnings performance, Vedanta trades at a lower price-earnings (P/E) multiple of 7.1 compared to Hindustan Zinc's 14.7 and Hindustan Copper's 44.8. Vedanta Aluminium Metal, valued at a P/E of 11.8, is also trading below Hindalco's P/E of 14.8, although it is at a premium to Nalco's P/E of 10.4.
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