At current stock prices, the share market is factoring in 16.5 per cent lower commodity prices for National Aluminium Co Ltd (Nalco), 11 per cent lower for Vedanta Ltd, and 9.8 per cent higher for Hindalco Industries, Emkay Global said in its latest noted. The brokerage said stocks — where the market is pricing in lower commodity prices — tend to provide better downside cushion with a view that elevated earnings could normalise over time. The broking firm suggested 'Buy' ratings on Vedanta and Nalco with targets of Rs 575 and Rs 275, respectively. It gave a target price of Rs 550 on Hindalco.
Emkay Global said Nalco’s stock is factoring in alumina price of $450 per tonne and that the brokerage sees an upside skew in earnings for Nalco and Vedanta, with Ebitda upgrade potential of 16.8 per cent and 4.4 per cent, respectively, for FY26, should spot prices uphold for the entire year.
"Aluminium has hit our 0-6M point target price of $2,700 per tonne, following the EU ban on Russian aluminium imports. At the current price level, we expect Hindalco, Vedanta and Nalco to generate upcycle profitability and returns; we reckon that the valuations are cheap against the strength in metal.
Hindalco, Vedanta and Nalco are trading at 6.2 times, 4.8 times and 5.5 times FY26E EV/Ebitda on Emkay's base case. Emkay said Nalco and Vedanta screen better on a relative basis with the benefit of elevated alumina and ali prices on near-term earnings.
"We keep our near/medium-term forecasts unchanged at $2,600/$2,700 per tonne for FY26/27, with the expectation that ali supply/demand remains in a modest deficit this year, while tariffs raise the US Midwest premia. We also note that the deadlock between Guinea and EGA has not resolved yet, which is keeping the bauxite market tight," Emkay said.
At this level, Emkay expects Hindalco, Vedanta and Nalco to generate upcycle profitability as well as returns, and reckon that the valuations are cheap against the strength in metal. Its pecking order is Nalco, followed by Vedanta and Hindalco.