Hindalco, Vedanta Shares Gain Up to 3% on JPMorgan's Bullish Outlook

Global Brokerage JPMorgan Upgrades Hindalco Industries and Vedanta

Shares of Hindalco Industries and Vedanta rose significantly in Tuesday's trade, with both companies experiencing gains of up to 3 percent. The increase in stock prices can be attributed to global brokerage JPMorgan upgrading both stocks, citing expectations of sustained higher aluminium prices and improved profitability.

JPMorgan's Upgrades and Price Targets

JPMorgan has raised its rating on Hindalco Industries and Vedanta to "overweight" from "neutral", indicating a shift in the brokerage's confidence in the companies' prospects. Furthermore, JPMorgan has increased the price targets for both companies, implying potential upside of up to 22 percent.

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Hindalco Industries' Performance

Shares of Hindalco Industries climbed over 4 percent to Rs 964.9 per share on the NSE, marking the fifth straight session of gains. The stock has risen nearly 10 percent during this period. The brokerage has increased Hindalco's price target to Rs 1,125 per share from Rs 875, indicating a potential upside of about 20 percent from its previous close. JPMorgan attributes the improved profitability to the restart of the Oswego plant and gains from higher scrap spreads at Hindalco's subsidiary Novelis.

Vedanta Shares Advance

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Vedanta shares also advanced over 4 percent to Rs 718.95 per share on the NSE. JPMorgan has raised Vedanta's price target to Rs 850 per share from Rs 680, indicating a potential upside of about 22 percent from its previous closing level. The brokerage notes that Vedanta's risk-reward has turned favourable, with its estimated enterprise value to EBITDA for FY2027 at around 4 times. It adds that strength in aluminium and zinc businesses is expected to offset weakness in oil and gas volumes.

Market Outlook

JPMorgan's report highlights the potential for sustained higher aluminium prices due to geopolitical tensions in West Asia. The brokerage expects earnings growth to be driven by higher prices on the London Metal Exchange and rupee depreciation. Additionally, JPMorgan notes that recent supply disruptions due to smelter outages in the region could further contribute to elevated aluminium prices. The brokerage believes that tailwinds from the commodity cycle could help ease recent debt concerns for both companies, while the recent correction in stock prices has made valuations more attractive.