Vedanta shares: HZL drives Q1; CLSA, JPMorgan see upside; sell stock, says Citi

Vedanta's June quarter results largely met analyst estimates on revenue front, driven by higher LME, premium, and forex gains. Its profit more tha doubled for the quarter. While a handful of brokerages such as CLSA, Investec, JPMorgan, MOFSL, Emkay Global, ICICI Securities and Kotak Securities see up to 32 per cent upside for the stock, Citi has a contra call, as it sees Vedanta shares plunging 11 per cent from here on.

On Friday, the scrip was trading at Rs 266.55 level, down 0.5 per cent.

MOFSL said Vedanta's Q1 performance came largely as expected, supported by better volumes and favorable LME prices. It noted that the management targets to maintain strong growth in earnings, driven by the upcoming capacity supporting higher VAP products and a favorable pricing environment. The guided capex plans are progressing well and will likely lead to further cost savings, MOFSL said as it believes Vedanta remains firm on its deleveraging plans and higher cash flows will support both its expansion plans and deleveraging efforts.

"The stock currently trades at 7.6x EV/Ebitda on the FY28 estimate. Based on our valuation, we derive a fair value of Rs 290 per share, with the Zinc business remaining the largest contributing vertical. We reiterate our Neutral rating on the stock," MOFSL said.

Emkay said Vedanta reported a strong Ebitda, with 96 per cent of consolidated Ebitda coming in from HZL. Zinc International continued to improve, with lower costs and Gamsberg Phase-II on track for August 2026 commissioning, while Ferrochrome delivered a record quarter supported by higher realizations, the domestic brokerage said.

"Copper India volumes remained healthy, although Copper International was impacted by Middle East disruptions. We believe FY27 earnings are well bolstered, despite a 19.7 per cent sequential correction in silver prices aided by firmer zinc prices (up 3.8 per cent), continued cost optimization, and supportive sulfuric acid pricing," it said.

Emkay retained its 'Buy' rating on the stock with a target of Rs 350, the highest so far.  CLSA and ICICI Securities suggested a target of Rs 345, Nuvama sees it at Rs 333, Investec at Rs 319 and Kotak at Rs 305. MOFSL gave a target of Rs 290. Citi's target of Rs 235 is the lowest.

Nuvama said is factoring in LME zinc price of $3,200 per ton and $3,000 per ton in FY27 and FY28 and silver price of $65 and $70 per ounce in FY27 and 28. It has ‘Buy’ rating with a target of Rs 333 per share, valuing on FY28E basis.

"We give 30 per cent holdco discount to its share in HZ. Stock movement is likely to mirror HZ’s share price movement. It trades at 3.1x/2.9 times FY27E/28E EV/Ebitda," Nuvama said.