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Stock Price Trend: Vedanta has outperformed benchmark Nifty Metal this year so far while Hindalco underperformed. Vedanta has surged over 61 percent in 2024 YTD while Hindalco is up just 5 percent. The metals market has seen a strong performance driven by positive PMI data from China and solid US economic fundamentals, leading to higher commodity prices, especially for base metals. Hindalco and Vedanta’s comparison can help identify better long-term investment opportunities.

The metals market has experienced a strong performance in the past month, largely due to positive PMI data from China and solid economic fundamentals in the US. This has driven up commodity prices, particularly for base metals. Supply constraints in copper and aluminum, alongside a ban on Russian-origin metal from the London Metal Exchange, have further supported metal prices. With the potential for interest rate cuts from the Federal Reserve and an anticipated stimulus from China, the outlook for metals remains positive.

In this environment, comparing Hindalco and Vedanta can help determine which metal stock may offer superior long-term investment opportunities.

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Stock Price Trend

Vedanta has outperformed benchmark Nifty Metal this year so far while Hindalco underperformed. Vedanta has surged over 61 percent in 2024 YTD while Hindalco is up just 5 percent. In comparison, the Nifty Metal index has gained over 17 percent in this period.

This year so far, Vedanta has given positive returns in 3 of the 4 completed months so far while Hindalco has been positive in 2. Vedanta rallied 46.46 percent in April after a 1.3 percent rise in March. Meanwhile, it fell 2.5 percent in February but rose 6.4 percent in January this year. In the 2 sessions of May, the stock has advanced 5.3 percent.

Hindalco, on the other hand, gained 15 percent in April, extending gains for the 2nd straight month, after a 11.19 percent surge in March. However, it fell in the first 2 months of this year, down 5.7 percent in January and 13 percent in February. It has been flat, up just half a percent in May.

Meanwhile, in the last 1 year as well, Vedanta has been the better stock, jumping around 50 percent whereas Hindalco has rallied 45 percent. In comparison, Nifty Metal has surged 110 percent in this time.

Both Vedanta and Hindalco have also hit their 52-week highs in recent times along with Nifty Metal. Vedanta hit its 52-week high of ₹419 in intra-day deals today, May 3, 2024. The stock has now advanced 101.5 percent from its 52-week low of ₹207.85, hit on September 28, 2023.

Meanwhile, Hindalco touched its all-time high of ₹661.30 last month on April 26, 2024, and is currently just 2 percent away from the peak. Currently trading at ₹646, it has rallied over 64 percent from its 52-week low of ₹398.00, hit on May 25, 2023.

Moreover, in the long term, 3 years, again Hindalco has emerged as the winner. It has surged 78 percent while Vedanta jumped 61 percent.

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Earnings

In the March quarter, Vedanta reported a 27 percent decline in its net profit to ₹1,369 crores on the back of surging finance costs and weak prices of metals such as zinc, copper, and aluminum. It had posted a net profit of ₹1,881 crore in the same period last year. Meanwhile, its revenue from operations fell 6 percent YoY to ₹34,937 crore in Q4FY24.

The company said that short-term and long-term demand remains robust in India. “The demand is expected to remain strong in upcoming years due to thriving infrastructure, manufacturing, automobile, and EV/renewable sectors,” Vedanta said in an investor presentation.

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Meanwhile, Hindalco has not yet reported its March quarter results. In the December quarter, the firm reported a 71 percent YoY growth in its consolidated net profit at ₹2,331 crore versus ₹1,362 crore a year ago. Meanwhile, its revenue from operations in the third quarter fell marginally to ₹52,808 crore from ₹53,151 crore in the same quarter of last year.

“The copper business registered a record EBITDA, up 20 percent YoY on the back of strong volume growth and robust operations,” Hindalco managing director Satish Pai said.

The aluminum upstream business EBITDA rose 54 percent from the year-ago period, supported by stable operations and lower raw material costs, “which keeps us positioned in the first quartile of the global cost curve”, he said.

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Which metal stock has better long-term investment opportunities?

Sanjay Moorjani, Research Analyst, Samco Securities likes Hindalco better

Incorporated in 1958, Hindalco Industries Limited is the metals flagship company of the Aditya Birla Group. Now, Hindalco is advancing from a manufacturing company to a manufacturing solutions provider by moving further down the value chain and co-creating solutions with customers. The company has announced organic growth investments of around $1.13 Billion which are planned to be allocated to high-growth downstream projects in Electric Vehicles (EVs), e-mobility, packaging, batteries, building and construction and consumer durables. India’s growth story remains strong on account of increased focus by the government on infrastructure, railways, defence and manufacturing. 

Additionally, the government’s rooftop solar scheme will serve as another tailwind for Hindalco along with the already growing EV market. These futuristic sectors are expected to see a lot of traction going forward and Hindalco’s downstream initiatives position it to capitalise on these opportunities fully.

On the other hand, Vedanta is one of the world’s leading natural resources companies spanning across India, South Africa, Namibia, Liberia, UAE, Korea, Taiwan and Japan with significant operations in Oil & Gas, Zinc, Lead, Silver, Copper, Iron Ore, Steel, Nickel, Aluminium, Power & Glass Substrate and foraying into electronics and display glass manufacturing. The proposed demerger in Vedanta would present an opportunity for investors to invest in individual businesses independently, essentially creating pure-play investment options. 

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However, it’s crucial to note that Vedanta’s debt obligations persist despite this structural change. Additionally, while Vedanta’s shares have experienced notable rallies in recent times, operational performance improvements haven’t seen any positive surprises. However, the debt obligations of Vedanta would remain unaffected. In the last month, Vedanta’s shares have rallied a lot without much of an improvement in its operational performance.

While both Hindalco and Vedanta present compelling investment propositions, Hindalco’s strategic focus on downstream initiatives aligned with futuristic sectors positions it as a promising long-term investment choice. Investors can consider Vedanta’s businesses post its demerger.

Parthiv Jhonsa, Lead Analyst (Metal and Mining), Anand Rathi Institutional Equities also picked Hindalco over Vedanta

Hindalco has a strong aluminium and copper presence in the domestic market along with being one of the largest FRP producers globally (excl. China). As India is the only major economy where domestic demand for metals is expected to outstrip global growth figures, Hindalco is well-set in the non-ferrous sector, especially after the supply crunch caused by the ban on Russian metals in North America and the recent rally in copper.

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Sujit Modi, CIO, Share.Market, as well, favours Hndalco

A head-to-head comparison between the two stocks based on our factors tells us that both the stocks rank high on short-term measures like Momentum and Sentiment, however, in the longer time frame, factors like Quality & Value seem to favor Hindalco over Vedanta.

On the contrary, Aditya Welekar, Senior Research Analyst – Auto & Metals, Axis Securities prefers Vedanta over Hindalco

In the long term, we prefer Vedanta over Hindalco as Vedanta has multiple levers to grow both in volume and cost/operational performance. A vertical merger into six pure-play companies and the probability of an asset sale (steel business in Q1 or Q2FY25) can drive further upside from the current levels. For Hindalco, an update on Novelis IPO and its proceeds will be the key monitorable and critical risk.

Both Hindalco and Vedanta offer distinct advantages, however, more experts favor Hindalco. Hindalco’s strategic positioning in high-growth downstream sectors and consistent operational performance make it an attractive option for long-term investors. Vedanta’s potential demerger and diversified portfolio present opportunities but come with some risks due to debt obligations.