Kotak Bullish On Vedanta Aluminium; Citi Expects A Net Cash Position On The Stock By FY28e

[00:00:00]Well, let's turn our attention to Vedanta Aluminium and we have two brokerages that have come in there and they have initiated coverage on Vedanta Aluminium. First up City, they have initiated coverage post the demerger they have a buy rating target price at 560. They say the company is their top India metals pick. The drivers include the positive aluminium outlook, the growth potential both at Balco with regard to the expansion that's currently underway and Vedanta Aluminium has you know, has the deep bottle necking opportunity as well. Balco remember the listed entity has 51% stake in Balco.

[00:00:31]Next on cost focus, they are citing the higher captive alumina domestic bauxite and captive coal as well that will help them on the cost side. They're expecting the company as well to be net cash positive by FY 20th. That's interesting because currently they're having a debt of close to around 3 and 1/2 billion dollars odd. But what are they working with? They are incorporating aluminium prices for the next 2 years at around $3,400 per ton. That's a little bit higher than what current prices are. So they're clearly factoring in that the aluminium market will stay in a deficit, inventories will get drawn down which will drive up prices by around 15 to 20% is what they mentioned in their note. It could also move towards $4,000 on a per ton basis. So they're extremely positive it seems on the aluminium sector and that's why they're bullish on Vedanta Aluminium as well. Moving to Kotak, they have initiated coverage buy rating target price fair value they're saying is around 600 rupees. Factors that they are working with, the capacity additions underpin around a 6% volume growth over the next few years. So that's interesting because they are one of the few aluminium companies domestically that has capacity ready as they move from around 2 and 1/2 million to around 3 million tons odd. The integration benefits as well will flow in because of bauxite and coal mines as well and that's why they are working with the cost of production falling by around $150 per ton. They believe that the aluminium market will be in a structural deficit and that's why prices will remain elevated for longer which in turn will support earnings. They also cite that the free cash flows will drive D-D- deleveraging exercise and in turn reward shareholders. So, put everything together, two brokerages, they are optimistic on the prospects of Vedanta Aluminium and that's why they've initiated coverage with target prices much higher than current levels. We'll see how that goes.

[00:02:11]>> All right, we get it.