Vedanta Share Price Target Hits ₹965 on Metals Rally: Kotak

Vedanta's Rally Fueled by Demerger and Metals Boom

Kotak Institutional Equities has significantly raised its price target for Vedanta Ltd., reinforcing a bullish outlook on the mining conglomerate. The brokerage cites the ongoing rally in base and precious metals, coupled with anticipated value unlocking from the company's impending demerger, as key drivers for future growth. This positive reassessment reflects growing confidence in Vedanta's ability to capitalize on favorable market conditions and its strategic restructuring.

Kotak's Upgraded Stance

In a note released on Friday, January 16, Kotak maintained its "buy" rating on Vedanta's stock and increased its price target to ₹780 from a previous target of ₹650. This confidence is rooted in Vedanta's strategic positioning within what appears to be a sustained commodity upcycle. The firm believes the company is best placed among its peers to benefit from the current market dynamics, which have seen key industrial and precious metals reach new peaks.

Commodity Price Impact on Earnings

The brokerage's analysis highlights Vedanta's significant leverage to specific commodities. The note states that approximately 85% of Vedanta's estimated Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) for the fiscal year 2027 is linked to Aluminium, Zinc, and Silver. The breakdown shows Aluminium is expected to contribute nearly 50% of the EBITDA, with Zinc and Silver adding 20% and 15%, respectively. With these metals trading at multi-year or record highs in global markets, Vedanta's earnings potential is substantially enhanced, providing a strong tailwind for its financial performance.

The Demerger Advantage

A crucial catalyst for the re-rating is Vedanta's corporate restructuring. The company is nearing the final stages of receiving all necessary clearances for its proposed demerger. Kotak anticipates the process will commence in the fourth quarter of the current fiscal year (FY26) and conclude in phases during the first quarter of FY27. This strategic split is expected to assign higher valuation multiples to the Aluminium and Power divisions, unlocking significant shareholder value that is currently suppressed within the conglomerate structure. Reflecting this, Kotak has raised its EBITDA estimates for Vedanta by 8.7% for FY27 and 6.9% for FY28.

A Bullish Scenario at Spot Prices

Under current spot price conditions for metals, Kotak projects an even more optimistic share price target of ₹965. This scenario involves a substantial 19% increase in EBITDA estimates for the upcoming financial year, highlighting the direct and immediate benefit of the strong commodity market on Vedanta's valuation. This higher target underscores the sensitivity of the company's earnings to prevailing metal prices and the potential upside if the rally sustains.

Broader Analyst Consensus

The positive sentiment from Kotak is not an isolated view. Brokerage firm Nuvama recently issued one of the highest price targets for Vedanta, projecting it to move beyond ₹800 per share. Nuvama's analysis points to a potential 20% Compounded Annual Growth Rate (CAGR) in EBITDA between FY25 and FY28, driven by sustained high commodity prices and cost efficiencies. The broader market sentiment is overwhelmingly strong, with none of the 14 analysts covering the stock recommending a "sell." Ten analysts maintain a "buy" rating, while the remaining four suggest a "hold."

Stock Performance and Key Data

Vedanta's shares have mirrored this optimism. The stock closed 6% higher at a record high of ₹675 on Friday, January 16. Over the last 12 months, the stock has appreciated by 55%, demonstrating strong investor confidence and market momentum.

Future Growth Drivers

Beyond the immediate impact of metal prices and the demerger, Kotak also points to planned capacity increases across Vedanta's business segments as additional long-term drivers. Expansions in Aluminium, Zinc, and Power are expected to contribute to volume growth through FY27 and FY28, further bolstering the company's earnings potential irrespective of price cycles.

Conclusion

The upgraded price target from Kotak Institutional Equities underscores a powerful combination of favorable market conditions and strategic corporate action at Vedanta. The rally in key metals provides a strong tailwind for earnings, while the impending demerger promises to unlock structural value. Investors will now be closely monitoring the execution of the demerger and the sustainability of the current commodity cycle as key factors for the stock's performance going forward.