Accumulate aluminium stocks on dips; Hindalco remains top pick: Motilal Oswal's Siddhartha Khemka

The recent correction in aluminium prices has created a buying opportunity for long-term investors, according to Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services.

While higher global supply is expected to keep aluminium prices under pressure in the near term, Khemka believes structural demand and expanding value-added capacity will support earnings for Indian producers.

Khemka said Motilal Oswal continues to remain positive on the broader base metals cycle and expects companies focused on value-added products to deliver better margins and revenue growth over time. He recommended gradually accumulating quality aluminium stocks on declines, with

Hindalco and Vedanta Aluminium remaining the brokerage's preferred picks.

Khemka said aluminium prices have corrected sharply after faster-than-expected supply recovery, driven by the restart of smelting capacity in West Asia and higher production from China and Indonesia.

"What has changed is that there has been a good supply recovery and faster-than-expected restarting of some of this smelting infrastructure," he said.

According to him, aluminium prices have declined from around $3,800 per tonne to nearly $3,000, leading to a correction in aluminium stocks. However, he believes the long-term demand outlook remains intact.

"The structural demand story continues to remain a big positive," Khemka said, adding that prices at current levels would still allow Indian manufacturers to remain profitable.

He noted that companies are increasingly focusing on value-added products rather than primary aluminium production, which should help support profitability.

"For example, Hindalco is adding a lot more capacity on the value-added side, which will drive the margins going forward, plus also drive overall revenue growth," he said.

Summing up his view on the sector, Khemka said, "I would accumulate gradually in this dip. It's a good opportunity."

Among aluminium companies, Motilal Oswal continues to prefer Hindalco as its top pick, followed by Vedanta Aluminium.

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