Vedanta’s high dividend payout to continue, says Edelweiss, raises target price

Market


Brokerage and research firm Edelweiss interacted with Vedanta (VEDL) to get an update on its ongoing expansion plans, parent’s deleveraging target and more. The highlights of which were – FY24 is the year of commissioning of the ongoing expansion in zinc, aluminium, alumina, coal; high dividend pay-out to continue in FY24 & FY25; focus on curbing carbon emissions at the forefront.

“Vedanta’s low cost status in zinc and efforts to reduce its aluminium CoP below $1,500/t on a sustainable-basis (likely by FY26) will be a long-term positive. The expectation of reopening of China (demand to improve) will help base metal prices to sustain higher, providing a cushion to our financial numbers,” the note stated.

Besides, the brokerage house expects Vedanta Ltd to pay dividend per share (DPS) of 48/ 45 in FY24E/25E, implying a dividend yield of around 15% at CMP (current market price). Edelweiss has maintained its ‘BUY/SO’ rating on Vedanta shares with a revised target price of 374 apiece (earlier 355).

“We believe, majority of the debt reduction at Vedanta Resources (VRL) level will be via dividends received from Vedanta. The company has been consistently paying higher dividend to repay VRL’s debt, in turn benefitting minority shareholders too. It earlier introduced a capital allocation policy, wherein, it states that it will pass on the entire dividend received from HZ within six months; additionally the company will pay a minimum 30% of its attributable profits (ex-HZ) as dividend,” the note said.

Billionaire Anil Agarwal-led Vedanta Limited is one of the world’s leading mining and metals company with interests in zinc-lead-silver, Iron ore, Steel, Copper, Aluminium, Power, Oil and Gas across India, South Africa and Namibia.

“The company benefits from ownership of low cost, cash rich zinc-lead-silver businesses. It has globally competitive unit production costs in zinc, led by its quality captive mines. We believe that future growth is likely to be delivered by volume uptick in key divisions. Aluminium, Zinc, and Steel and cost efficiencies at aluminium operations. Besides, an expected dividend yield of ~15% (DPS of INR48) is another attraction,” Edelweiss added.

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


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