‘Lots to cheer’ in Vedanta stock, says Edelweiss, sees strong upside


In brokerage and research firm Edelweiss’ view, Vedanta’s EBITDA uptick on the back of higher volumes, despite low commodity prices, is its key strength. The brokerage is raising EBITDA by 15% through FY25E on average factoring in higher volume estimates for Vedanta. 

It believes that EBITDA, ESG and dividend are among a lot of factors to cheer for Vedanta, while maintaining its Buy rating on the stock and has raised its target price to 355 apiece (up from 265).

Analysts at Edelweiss met with Sunil Duggal, CEO of Vedanta (VEDL), to get insights into the company’s strategic initiatives, ESG endeavours and growth prospects. Key points from the meet were that the aluminium and zinc divisions are the key growth drivers, efforts are underway to boost production in O&G business, and committed to superior-to-industry ESG benchmarks. During the interaction, Duggal mentioned Vedanta has an edge—all its divisions are primed for growth and that should lift its EBITDA notably over next few years.

“We find Vedanta’s aggressive ESG approach and prudent capital allocation framework are the key differentiators. Key takeaways: i) Firm decarbonisation (encompassing green aluminium and copper), water positivity and waste management targets. ii) Debt reduction at parent likely to be achieved through upstreaming of dividend with no intention of Intercorporate deposits (ICD). iii) Committed to $4 bn deleveraging at VRL iv) Disciplined capital allocation framework balancing both growth and cash returns. We find the three-pronged focus on earnings growth, ESG and cash returns comforting,” the note stated.

Edelweiss has raised volume growth estimates across divisions, resulting in a 15–16% increase in EBITDA over FY23–25E. Besides, it expects Vedanta Ltd to deliver superior RoE of 31% on average through FY25E (global diversified players at 20%). It has kept the valuation multiple unchanged at 4x—similar to other diversified global players.

Shares in the company fell as much as 9% on Friday, snapping six days of gains, after the Mumbai-listed firm said the manufacturing business would fall within the purview of family trust Volcan Investments Ltd, reported Bloomberg.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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