Billionaire Anil Agarwal-backed Vedanta stock is an attractive bet ahead of its 1:6 demerger of business. Brokerages are optimistic on Vedanta after it reported earnings on expected line, while outlook is positive ahead. Brokerages like Centrum and Antique Stock Broking have recommended BUY or Hold on the stock.
Vedanta Share Price:
The stock price is currently at Rs 428.70 apiece with a market cap of Rs 1,67,638.34 crore. Vedanta's 52-week high is at Rs 506.85 apiece, and it has more than doubled from its 1-year low of Rs 207.85 apiece.
Vedanta has received approval for demerger of metals, power, aluminium, and oil and gas businesses to unlock potential value. After the exercise, six independent verticals - Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Limited - will be created.
As part of the demerger plan, for every share of Vedanta, shareholders will receive one share of each of the five newly listed companies. After the demerger, the businesses of Hindustan Zinc as well as the electronics business will remain with Vedanta Limited.
The company is expecting to complete its demerger by December 2024 end.
Here's what brokerages say about Vedanta:
Centrum On Vedanta:
VEDL is expanding its aluminium capacity at Balco by 600ktpa and improving VAP mix to 90% of product portfolio which leads to cost optimization through captive alumina and coal supply leading to margin expansion from USD600/t in Q4FY24 to USD1000/t in FY26E. The Kurloi and Radhikapur coal mine is expected to be commission by Q1FY26. Ghogarpalli mine is expected to commission by Q2FY26 and Sijimali by Q1FY26.
The 1000MW Meenakshi power plant capacity is expected to commission by FY25-end (earlier: mid-FY26E). VEDL received all clearances to operate Bicholim iron ore mine in Goa having 3.2mtpa capacity. Net debt stood at Rs 613bn as on June-end and generated FCF pre capex stood at Rs 43.7bn. Net debt/EBITDA improved from 1.9x to 1.5x YoY.
For Q2FY25, we expect sharp some moderation in margins across segments due to fall in commodity prices. We expect zinc india and aluminium to grow by 20% and 42% CAGR over FY24-26. Despite huge dividend payout of Rs45/sh each for and capex outlay of ~USD2bn each in FY25 and FY26, we expect strong earnings visibility and recently raised funds will help to generate strong FCF to deleverage net debt position by ~USD1.8bn. We maintain BUY rating with TP of Rs478, based on FY26 SoTP.
Antique Stock Broking On Vedanta:
Softening of spot commodity prices could impact topline growth in the near term while accrual of benefits of most cost optimization initiatives coming in from FY25 onwards would support profitability. We like the company's low-cost producer advantage but remain cautious of the debt levels amidst aggressive capex. We maintain HOLD rating and a SoTP-based TP of INR 457 with an implied 1HFY27E EV/EBITDA multiple of 4.2x (in line with global peers).
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
Click it and Unblock the Notifications
Sign in with Google