Vedanta Q1 profit may surge 162% on strong volume, zinc & aluminum price increase

Diversified natural resources company Vedanta is expected to report a whopping 162 percent increase in profit at Rs 1,610 crore in April-June quarter against Rs 615 crore in same quarter last fiscal. Results will be announced on July 25.

The growth is driven by strong volume and price increase in zinc and aluminum segments.

Revenue from operations may increase 26.8 percent year-on-year to Rs 18,300 crore in Q1, according to average of estimates of analysts polled by CNBC-TV18.

Operating profit is expected to jump 55 percent to Rs 5,320 crore and margin may expand 530 basis points to 29.1 percent compared with year-ago quarter.

Base metals like Zinc rallied 35 percent in past one year, aluminum 21 percent, lead 25 percent and copper 20 percent but sequentially, prices of copper, zinc and lead were down 3-6 percent.

Operating profit may be bogged down by multiple factors on a sequential basis:
-Outage in copper refinery
-Pot breakdown at Jharsuguda-1
-Higher alumina/raw material costs for the smelter
-Fire at Talwandi Sabo
-High discounts for low grade Goa ore

Hindustan Zinc:
-HZL is a subsidiary of Vedanta
-Vedanta owns 65 percent stake in Hindustan Zinc
-Approximately 55 percent of Vedanta's EBIT comes from HZL; HZL results already in the price
-HZL results disappointed on the operational front

Aluminum
-Profitability in aluminum seen rising on improved pricing and higher volumes
-Aluminum volumes may be higher due to higher output from BALCO’s new projects and Jharsuguda-II ramp up
-On a sequential basis, volumes will dip

Iron ore
-Iron-ore operations may deliver higher volumes and profitability
-Better sales volume post reduction of export duty on low grade iron ore in Budget
-On a sequential basis numbers may look weak though

Power
-Increased availability of domestic coal has enabled lower coal costs
-Weak demand & realisation may limit gains

Copper
-Volumes are estimated to be unchanged YoY at 100kt

Zinc international performance
-International zinc operation is expected to suffer on deferment of volume

The stock price rallied 72 percent in last one year.