Vedanta shares in focus post Q2 loss; stock price targets, analyst views on debt, dividend & more

Shares of Vedanta Ltd will be in focus on Monday morning after the mining major logged a consolidated net loss of Rs 1,783 crore for the September quarter compared with a profit of Rs 1,808 crore in the same quarter last year, thanks to adoption of new tax regime that led to net tax expense. Vedanta said its consolidated revenue from operations advanced 6.3 per cent year-on-year (YoY) to Rs 38,945 crore. This was the highest ever turnover for Vedanta. Ebitda for the quarter at Rs 11,834 crore was also the highest ever, led by aggressive cost reduction and operational volume delivery. Analysts said the Q2 performance was a tad below their estimates, as they trimmed their share price targets marginally on the counter. Capex, debt repayment could impact dividend payout by the Anil Agrawal company going ahead, analysts said.

"We marginally reduce our FY25 Ebitda estimate by 4 per cent, considering headwinds in the global commodity market, such as lower demand from China, a slowdown in China’s real estate sector, uncertainties in the Middle East and low LME prices. We reiterate our Neutral rating on Vedanta with an SoTP-based target price of Rs 220," Motilal Oswal Securities said.

At the Rs 233-odd level, the stock is trading at FY25E EV/Ebitda of 6.3 times and FY25E P/BV multiple of 3.2 times. The scrip is down 26.34 per cent year-to-date.

Vedanta has about Rs 9,000 crore of debt that will be up for refinancing by Q4FY24 and has $1 billion of debt that will be up for refinancing at the holding company.

"HoldCo has $3.1 billion of debt maturing in FY25, including $2 billion bonds. The recent arbitration case in favour of VEDL will reduce payout to the government by $20 million per quarter in the oil and gas vertical. Vedanta would also receive Rs 1,000 crore per quarter over the next five quarter, which will increase the cash flow of the vertical," Motilal Oswal said.

Antique Stock Broking said short-term subdued commodity prices would impact profitability as most cost optimisation initiatives are expected FY25 onwards. Higher FY24 capex guidance of $1.7 billion might limit dividend payout, it said.

"We incorporate lower aluminium prices and sales, roll over earnings estimate, and maintain BUY rating at a revised TP of INR 317 (earlier INR 325) with an implied 1HFY26E EV/Ebitda multiple of 4 times (earlier 4.1 times FY25)," it said.

Nuvama Institutional Equities, meanwhile, has turned positive on Vedanta, as it believes that the company would be able to manage its debt. Completion of aluminium projects in FY25 will help improve cash flows significantly, the domestic brokerage said adding that if the proposed sale of steel and iron ore assets happens, it will lead to further deleveraging.

"Risk-reward is favourable. We rollover partly to FY26E and raise our target to Rs 265 (earlier Rs 249), based on average FY25E/FY26E earnings. Reiterate ‘HOLD’," it said.

Also read: L&T Finance, Godrej CP, Arvind Fashions: Trading strategies for these buzzing stocks