Vedanta shares trading at two-year high: Time to buy, sell or hold?

Shares of metal and mining major Vedanta Ltd are trading near their two-year high as the stock has held onto Rs 300 mark for the last eight sessions. During the current leg of rally, the shares of Anil Agarwal-led metal and mining firm have scaled fresh highs on an intraday basis. In fact, the stock closed above the Rs 300 mark in the last five sessions.

The rally in the stock comes amid foreign brokerage CLSA upgrading Vedanta shares to 'Buy' from 'Underperform' with a revised price target of Rs 390 from Rs 260 earlier. The Anil Agarwal-led Vedanta Ltd is well-placed to benefit from commodity upcycle given its diversified exposure. Efforts to increase capacity and profitability across segments auger well, said the foreign brokerage.

Last week, the stock saw positive investor sentiment after the firm said it delivered highest ever annual volume across key businesses.

Vedanta said alumina production at Lanjigarh Refinery rose 18% (yoy) to 484 kt in Q4 and 3% (qoq) driven by better operational performance. In oil and gas business, average gross operated production came at at 117.8 kboepd in Q4. Rajasthan block’s average gross production was lower by 6% QoQ and by 13% YoY at 97.8 kboepd.

Another key factor behind the current leg of rally is the metals-to-oil conglomerate announcing it would raise up to Rs 2,500 crore ($299.6 million) through debt securities. The funds will be raised through the issue of non-convertible debentures on a private placement basis.  

On April 4, Vedanta Aluminium announced a major milestone in its ongoing expansion efforts to be among the top 3 global players with 3 million tonnes per annum (MTPA) of aluminium production capacity. The company announced the successful commissioning of the new 1.5 MTPA expansion at its world-class alumina refinery in Lanjigarh, Odisha. With this, the alumina refinery’s production capacity has now increased to 3.5 MTPA from the existing 2 MTPA.

Brokerage Nuvama is positive on the stock with a target price of Rs 394. It has revised its earlier target of Rs 371.

“Management has guided for USD in debt reduction at Vedanta Resources by FY27 without any incremental debt at Vedanta Ltd. The monetisation of steel and iron ore assets by Q1FY25E (expect $2 bn) shall act as a first step. Moreover, we expect a DPS of Rs 40 each in FY25E and FY26E. Reiterate 'BUY' with a target price of Rs 394 (earlier Rs 371),” said Nuvama.

The stock of Anil Agarwal-led firm hit a fresh high of Rs 369.80 on April 12, 2024. In comparison, the BSE metal index also hit a 52 week high of 30,671 in the current session. In terms of returns, the stock fell 11.71% in two years and rose 34% in a year. In five years, the stock has risen 100%. The large cap stock is trading higher than the 10 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day moving averages signaling the stock is trading in bullish zone.

Vedanta shares gained 2.23% intraday to a fresh high of Rs 369.80 on Friday. At 2:46 pm, the stock rose 1.88% to Rs 368.50 on BSE. Market cap of the firm rose to Rs 1.36 lakh crore. Vedanta shares have a one-year beta of 0.8, indicating very low volatility during the period.    

In terms of technicals, the relative strength index (RSI) of Vedanta stands at 84.1, signaling the stock is trading in the oversold territory.

Vedanta Ltd is a subsidiary of Vedanta Resources Ltd and has operations in oil and gas, zinc, lead, silver, copper, iron ore, steel, and aluminium and power across India, South Africa and Namibia.