Buy Vedanta; target of Rs 525: Emkay Global Financial

Emkay Global Financial' research report on Vedanta

Hindustan Zinc (HZ) is a key beneficiary of the uptrend in silver prices, which are up 63% YTD. We believe the exposure to silver is underpriced as the consensus expectations trail the strong move in silver in recent months with the metal now trading at USD47/oz (vs USD34/oz in Q1FY26 and USD30/oz in FY25). Global peers like Fresnillo and Grupo Mexico have already re-rated YTD, and we therefore see a strong potential for HZ to be repriced higher, to reflect current prices. HZ (not rated) contributes 40% to VEDL’s EBITDA and is the core part of the group portfolio. Per our calculations, a USD1/oz move in silver prices has 1% sensitivity to HZ’s EBITDA. Interestingly, silver is a by-product of zinc which implies that 88% of silver revenue is a direct pass-through to EBITDA as the cost of production remains tied to zinc production.

Outlook

We retain BUY on VEDL, with an unchanged TP of Rs 525.