Vedanta Q1 profit surges on metals rally, trades at steep discount
Vedanta's June quarter earnings more than doubled on the back of soaring aluminium, copper and zinc prices, yet the conglomerate trades at a fraction of its peers' valuations ahead of a $160 million index inflow.
Vedanta Group reported a 152% year-on-year jump in first-quarter net profit. The surge was driven by a broad rally across base metals that propelled its aluminium subsidiary to a 216% earnings increase.
The performance was underpinned by a 46% rise in average LME aluminium prices to $3,565 per tonne. Vedanta Aluminium's profit growth dwarfed the 75% rise posted by Hindalco and the 91% gain at National Aluminium Company.
Analysts expect this pricing strength to persist through FY27, with average aluminium prices forecast to exceed the previous peak cycle. This outlook is supported by US-Iran war-related supply disruptions, Chinese production caps, and delays in bringing new smelters online. Copper and zinc prices are also projected to remain firm.
To capitalize on the favorable market, the group is deploying significant capital. Vedanta has earmarked ₹7,000 crore for growth capex in FY27, directing ₹5,000 crore to Zinc India and ₹2,000 crore to other businesses. Its aluminium arm is allocating ₹2,000-2,500 crore to Bharat Aluminium Company to expand volumes and integrate backward into bauxite, alumina and coal.
ICICI Securities noted that Vedanta Aluminium is uniquely positioned among Indian producers due to these near-term growth levers and its integration strategy. The focus on value-added products is designed to reduce costs and improve cash flow visibility. Together, Vedanta and its aluminium unit generated more than 95% of the group's net profit in the June quarter.
Despite the operational momentum, a distinct valuation gap persists. Vedanta Aluminium trades at a price-earnings multiple of 11.8, below Hindalco's 14.8. The parent company's discount is starker at a P/E of 7.1, compared to 14.7 for Hindustan Zinc and 44.8 for Hindustan Copper.
Four Vedanta Group stocks are poised to attract $160 million in passive inflows during the Nifty's September rebalancing. This forced buying could serve as a catalyst for the market to close the valuation gap as the company's earnings visibility sharpens.
