Why Hindalco and Vedanta Aluminium could outperform over the next year

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Analysts expect Hindalco Industries and Vedanta Aluminium to outperform over the next 9-12 months, supported by a combination of favourable market conditions, operational improvements and expansion plans, even as aluminium prices have corrected from recent highs. 

According to analyst estimates, shares of India's two largest aluminium producers could gain around 20 per cent from current levels, with brokerages recommending investors use the ongoing correction as an opportunity to accumulate the stocks.

Vedanta Aluminium is expected to benefit from continued cost improvements, volume growth and stronger cash flows, which are likely to help reduce its debt burden. Hindalco, meanwhile, is projected to gain from stabilising earnings at its US subsidiary, Novelis, following recent volatility caused by the impact of factory fires.

Hindalco's long-term expansion strategy also remains a key positive.

"Hindalco remains a buy-on-dip for us because it is doing a lot of expansion, especially in upstream, and a lot of it will come on board in 2028-29," said Aditya Welekar, analyst at Axis Securities. The brokerage has set a target price of INR 1,250 for the stock.

Both companies are also expected to benefit from a widening global aluminium deficit, which analysts believe will keep average aluminium prices higher than the previous fiscal year's levels.

Although aluminium prices have declined for the fourth consecutive week after touching nearly USD 3,790 per tonnes on the London Metal Exchange earlier this month, they remain supported by expectations of tighter market fundamentals. Prices have retreated about 17 per cent from their peak.

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The rally in aluminium prices followed the outbreak of the Iran war on February 28, which disrupted production at West Asian aluminium facilities. The region accounts for around 8 per cent of global aluminium output, making the disruption one of the industry's largest supply shocks.

Highlighting the changing market outlook, Hindalco Industries Managing Director Satish Pai said last month that "the market has moved from an earlier expectation of 0.3 million tons deficit to a 1.5 million tons deficit for the calendar year 2026, which should support prices and drive visible inventory drawdowns."

Analysts remain positive on both stocks even after Hindalco retreated from the lifetime high it reached in early June and Vedanta Aluminium traded below its listing price from earlier this month. CLSA India recently initiated coverage on Vedanta Aluminium with an "outperform" rating, citing a "higher-for-longer" aluminium cycle and strong operational tailwinds.

Kotak Institutional Equities said Vedanta Aluminium's capacity expansion and integration across bauxite and coal mines are expected to strengthen its earnings profile. "Capacity additions underpin about 6 per cent volume CAGR over FY26-29, while integration across bauxite and coal mines is set to materially lower costs by about USD 150 per tonne," the brokerage said.

For Hindalco, most analysts continue to maintain "buy" or "hold" ratings, supported by the resilience of its downstream business, which is relatively insulated from aluminium price fluctuations, and the expected recovery in earnings at Novelis.