Vedanta shares, down 15% in a month, get 'Buy' call from Investec; here's why

Billionaire Anil Agarwal-led Vedanta Ltd has been upgraded by brokerage Investec to 'Buy' from earlier 'Hold'. "The stock now presents an appealing opportunity with an average FCF/dividend yield of 12/7 per cent over FY26-27E. Further, the current market price (CMP) of Vedanta reflects around 12 per cent discount of Ally, Zinc, Silver to spot LME (per cent), accounting for potential risk w.r.t demand price elasticity," it stated.

"Even with a 12 per cent decline in LME vs. spot, avg. EPS would be near Rs28, suggesting servicing VRL (parent Vedanta Resources Ltd) maturity plus interest outgo won't be a challenge. If for a steep slide in LME, we see risk w.r.t servicing parent's obligation. Alternately, under current FX assumptions and a 15 per cent decline in LME vs. spot, we see earnings likely utilised for pay-out," the brokerage added.

"Factoring the attractive risk-reward profile, demerger, dividend yield support (6 per cent, FY26-27E), near-term CF profile adequate to address VRL maturity + interest, we upgrade to BUY," it further said.

Vedanta shares settled 1.38 per cent lower at Rs 370.50 on Wednesday, slipping 15.28 per cent in the past one month. Investec has given a target price of Rs 510 for Vedanta, implying a potential upside of 37.65 per cent.

The diversified metals company, currently navigating a major demerger, reported its highest-ever aluminium output for both the fourth quarter (Q4 FY25) and the full financial year (FY25). Its zinc arm, Hindustan Zinc (HZL), also delivered record highs in mined and refined metal production, solidifying Vedanta's standing across key commodities.

It posted historic highs in aluminium and zinc productions along with registering strong gains across iron ore, steel, oil & gas and power segments.

Annual aluminium production hit 2,421 kt, up 2 per cent year-on-year (YoY), with fourth-quarter output rising 1 per cent. Alumina production climbed 9 per cent annually, bolstered by expansion projects. However, quarterly output faced temporary supply chain issues that were resolved by the end of the quarter.

Zinc India logged its highest-ever mined metal production at 1,095 kt and refined metal output at 1,052 kt — both up 2 per cent over last year. Fourth-quarter mined output jumped 17 per cent, sequentially, driven by richer ore grades at Agucha and Zawar, while refined metal production rose 4 per cent. Saleable silver output increased by 10 per cent during the quarter.