Vedanta shares trading below Rs 300 mark since two months; what should investors do?

Shares of metal and mining major Vedanta Ltd have been trading below the key Rs 300 mark for the last two months. The stock last closed at Rs 300.35 and hit an intraday high of Rs 301 on May 29, 2023. Since then, shares of the Anil Agarwal-led company have struggled to breach the Rs 300 mark on an opening, closing and intraday basis. Adding to the bearishness, currently, the Vedanta stock is trading lower than the 10 day, 20 day and 50 day, 100 day and 200 day moving averages.  

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The metal stock, which is trading 13% higher to its 52 week low of Rs 240.60 on July 28, 2022 has lost 18.25% from its 52-week high of Rs 340.75 hit on January 20, 2023.

In the current session, the metals and mining stock was trading 0.47% higher at Rs 278.55 on BSE. Market cap of the firm stood at Rs 1.03 lakh crore. A total of 4.25 lakh shares of the firm changed hands amounting to a turnover of Rs 11.80 crore on BSE.

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In terms of technicals, the relative strength index (RSI) of Vedanta stands at 46.6, signaling neither the stock is overbought nor oversold. The stock has a one-year beta of 1.2, indicating high volatility during the period. The PE ratio of Vedanta stands at 3.54 signaling the stock is undervalued compared to its industry. The PE of the mining industry stands at 6.03.

Vedanta shares have lost 11.86% this year and risen 13.48% in a year. In comparison, its peer Hindustan Copper climbed 27.82% in a year and gained 9.25% in 2023. Shares of another sectoral peer NMDC have grown 30.32% in a year but fallen 11% this year.

Abhijeet from Tips2trades said," Vedanta is sideways on the daily charts with a strong support zone at Rs 268-274 levels. A daily close above the resistance of Rs 286 could lead to targets of Rs 295-300 in the near term."

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Vedanta’s consolidated profit plunged 40 per cent year-on-year (YoY) to Rs 2640 crore in the June 2023 quarter compared with Rs 4421 crore in the corresponding quarter last year. Net sales for the quarter fell 13 per cent YoY to Rs 33,342 crore from Rs 38,251 crore in the corresponding quarter last year.

EBITDA slipped 35% to Rs 6,975 crore for the April-June quarter from Rs 10,741 crore in the corresponding period of last year, due to lower output commodity prices and lower sales.

Financial costs rose nearly 74% to Rs 2,110 crore in Q1 on increase in the blended cost of borrowings and average borrowings.

Antique Stock Broking reduced its target to Rs 329 apiece adding that a sharp rise in debt was posing a concern.

Vedanta reported a net debt of about Rs 59,200 crore.

"Benefits from most of the company’s cost optimising initiatives are expected to accrue 2HFY24 onwards. Hence, short term subdued commodity prices might impact profitability. Lowering of CoP for most metals and a better sales mix would enhance profitability. Higher FY24 capex guidance of $1.7 billion might limit dividend payout," said Antique Stock Broking.

Systematix Institutional Equities sees a 11% upside in the stock and has assigned a target price of Rs 311 with a hold call.

"Vedanta posted weak performance across segments despite higher   volumes, the impact of which was offset by lower commodity   prices. We believe elevated dividend is likely to be a drain on cash and lead to rising levels of debt already seen in the last two quarters. Net debt increased by Rs 13,900 crore during the quarter due to sustaining capex and dividend payout, resulting in a deterioration in the net debt/Ebitda ratio," said Systematix Institutional Equities.

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