Vedanta shares climbed 3% today; Rs 250 or Rs 400, where is the stock headed?

The key takeaway from the recent Vedanta analyst meet was that the company management is fully-focused on execution and deleveraging. The meet led analysts revise their price targets on the stock, triggering a 4 per cent jump on the Vedanta counter on early Wednesday.

Vedanta shares rose 3.18 per cent to hit a high of Rs 272.15 on BSE. Antique Stock Broking said the Anil Agarwal company has established a huge, inimitable asset base spanning across aluminium, zinc-lead-silver, oil & gas, iron, steel, power, and copper with expected replacement cost in excess of $50 billion.

"To address the concerns of debt overhang at the parent level Vedanta Resources, dividend upstreaming, capital allocation risk, and impairment of business autonomy, a demerger is underway to grant sector-focused independent businesses autonomy to pursue strategic agendas," it said.

Vedanta, Antique said, has undertaken a multitude of capex projects for volume expansion and cost reduction, the benefits of which would start accruing H2FY25 onwards;.

"We like the lower cost producer advantage (in HZL, aluminium), strong growth prospects and maintain BUY rating at a target of Rs 318 with an implied FY26 EV/EBITDA multiple of 3.9 times," it said.

Kotak Institutional Equities said the key positive triggers for Vedanta include deleveraging of the parent entity through divestment of the iron and steel business, restart of its copper smelter its demerger.  The merger of the parent’s copper business with Vedanta at expensive valuations is a key downside risk, it said as the brokerage suggested a fair value of Rs 255 on the stock.

Motilal Oswal finds the Vedanta stock worth Rs 270. Vedanta undertaking multiple capex to expand its capacities across verticals may continue to exert pressure on its cash flows, Motilal Oswal said adding that until the debt repayment overhang at Vedanta Resources is resolved, debt overhang at Vedanta and Hindustan Zinc will continue to loom.

"Despite the near-term headwinds, the long-term demand prospects look positive. Vedanta is currently trading at 6.3 times FY26E EV/EBITDA multiple and 3.8 times FY26E P/B multiple and we believe the stock is adequately pricing in the robust outlook," it said.

Nuvama said the Vedanta management guided for $3 billion in debt reductions at VRL by FY27 without any incremental debt at Vedanta. The monetisation of steel and iron ore assets, it said, are likely by Q1FY25E and would act as a first step.

Nuvama also sees a dividend per share (DPS) of Rs 40 each in FY25E and FY26E. For now, the brokerage has reiterated its ‘BUY’ rating on the Vedanta stock with a revised target price of Rs 394 from Rs 371 earlier.

 

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