Vedanta’s 18 per cent drop in Q3 profit was against over 30 per cent fall in bottom line that a a few brokerages projected earlier. Ebitda at Rs 8,530 crore, analysts said, was up 27 per cent sequentially, which beat their forecasts on lower-than-expected CoP in aluminium and oil & gas along with higher iron ore prices. Analysts said about 50 per cent of incremental sequential Ebitda came in from aluminium operation.
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“With successful debt restructuring of the parent, Vedanta’s focus is on completing its expansion in India in FY25E and, thus, generating additional cash flows. We believe it will pay dividend per share of Rs 40 in each of FY25E/26E. Reiterate ‘BUY’ with target price of Rs 371, based on FY26E SoTP,” said Nuvama Institutional Equities.
Nuvama said Vedanta may complete its expansion in aluminium and zinc within FY25, and, thus, generate additional cash flows. It also believes the Anil Agarwal-led company to monetise steel assets by H1FY25 and successfully split its businesses (by FY25-end), which should enhance value.
“Moreover, promoters can still offload up to 13.6 per cent stake to revert to 50.1 per cent stake in Vedanta, providing additional liquidity,” it said.
Motilal Oswal Securities said Vedanta’s performance improved substantially during the quarter, driven by better-than-estimated performance across segments. An extension of the maturity of bonds at holding company by three years provides adequate liquidity comfort to the company in the near term, it said.
The Vedanta management has guided for an Ebitda per tonne guidance of $1,000 per tonne for its aluminium business with a conversion cost of $1,600 per tonne. Capex for FY24 is expected to be in the $1.5-1.6 billion range.
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The Vedanta management expects to ramp up its Zinc International volumes to 500kt in the near term, with a medium-to-long-term target of 1mt. For Zinc International, Ebitda per tonne guidance stands at $800 per tonne in the near term and $1,000 per tonne in the medium-to-long-term period.
Vedanta said it is increasing its power portfolio to 4,780mw from 2,580mw by setting up the 1,000mw Meenakshi, and 1,200mw Athena power plants.
Vedanta said it received inquiries no sale of non-core assets, and that it is in the stage of sharing data and undertaking site visits. It expects concrete response by Q4FY24 or Q1FY25 on the same.
“To account for its better performance, comfortable debt position, higher volumes, and improved Ebitda guidance by the management, we have raised our FY24/FY25/FY26 Ebitda estimates by 15 per cent/1 per cent /3 per cent.
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Vedanta currently trades at 6.4 times FY26E EV/Ebitda, and we believe that the stock is adequately priced in at current levels. We reiterate our Neutral rating on VEDL with a revised SoTP-based target of Rs 270,” Motilal Oswal Securities said.
