Vedanta Aluminium Metal Ltd may be down more than 12 percent from its listing price, but brokerages remain firmly positive on the newly listed company, citing a favourable aluminium cycle, operational growth prospects and improving cost competitiveness. CLSA has maintained an "Outperform" rating on Vedanta Aluminium with a target price of Rs 540 per share, implying an upside of about 18 percent from Tuesday's closing price of Rs 456.

The brokerage said it remains positive on both the aluminium industry's fundamentals and the company's operational growth trajectory. According to CLSA, Vedanta Aluminium and Metal's ongoing backward integration initiatives should strengthen its cost leadership position. Further, robust free cash flow generation is expected to support deleveraging and shareholder returns through dividends.

CLSA added that the stock's current valuation discount to global peers appears unjustified given its growth outlook and cash generation potential.

Vedanta Aluminium shares closed at Rs 456 on Tuesday, down 4.7 percent for the day and about 12.6 percent below their listing price of Rs 522 on June 15. The stock was listed following the Vedanta group's demerger, under which the aluminium business was separated into an independently listed entity.

Despite the recent weakness, brokerages have largely turned constructive on the stock.

Earlier this week, Kotak Institutional Equities initiated coverage on Vedanta Aluminium with a "Buy" rating and a fair value of Rs 600 per share. The brokerage said a premium valuation is warranted due to the company's strong free cash flow profile, sector-leading volume growth, cost-reduction opportunities and attractive brownfield expansion pipeline.

Kotak expects aluminium capacity additions to support around 6 percent volume CAGR over FY2026-29 and estimates that increasing integration across bauxite and coal assets could lower production costs by roughly $150 per tonne. The brokerage also highlighted a favourable industry backdrop, with structural supply deficits supporting aluminium prices and earnings growth.

Citi has also maintained a "Buy" rating on the stock with a target price of Rs 560 per share. The brokerage expects aluminium prices to remain supported by persistent supply deficits despite near-term volatility and forecasts the metal to average $3,700 per tonne in calendar year 2027 and $3,800 per tonne in calendar year 2028. According to Citi, any meaningful supply recovery could take between six and 18 months, allowing aluminium prices to potentially rise to around $4,000 per tonne from current levels of roughly $3,400 per tonne.

The aluminium business has emerged as the crown jewel of the Vedanta group's restructuring. At the time of listing, it was assigned the highest valuation among the four demerged entities and continues to account for the largest share of the group's unlocked value. While brokerages broadly agree that Vedanta Aluminium offers investors a pure-play exposure to the aluminium cycle, they also flag that the investment case remains closely tied to  global aluminium prices.