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Vedanta Q3 Results Preview: Net profit likely to rise 30-45%, revenue 38-50%

The sequential increase in EBITDA is mainly led by higher EBITDA at Zinc India and oil and gas operations, partially offset by lower earnings in the aluminum division, said Kotak Institutional Equities

January 28, 2022 / 12:28 PM IST
Vedanta Limited | Representative image

Vedanta Limited | Representative image

 
 
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Vedanta Limited, one of the big names in the oil and gas and metals business, is expected to report a strong on-year growth of 30-45 percent in consolidated profit after tax (PAT) at Rs 4,600–4,750 crore, driven mainly by Zinc India and Aluminium businesses owing to higher LME (London Metals Exchange) prices and increase in production. Sequentially, the PAT may decline 1–8 percent.

The company will declare the results for the third quarter ended December 2021 on January 28.

Experts expect its consolidated revenues to climb up by 38-50 percent on year to Rs 31,300–33,800 crore. On a sequential basis, this works out  to a growth of 3–11 percent.

It may be noted that the company had registered a PAT of Rs 3,299 crore in the corresponding quarter a year ago when its consolidated revenues stood at Rs 22,735 crore.

In the previous quarter of this year, the profit was Rs 4,615 crore (adjusting for extra ordinaries of Rs 46 crore, the profit stood at Rs 4,661 crore) and the revenues were recorded at Rs 30,401 crore.

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According to a report from Phillip Capital, the consolidated revenues are expected to climb up 45.5 percent on year to Rs 33,084 crore, an increase of 8.8 percent on a sequential.

The growth is likely to be driven by a 4 and 8 percent on-quarter increase in realisations of aluminium and crude.

The brokerage expects a robust performance from the company’s Zinc India business which is likely to drive improvement in overall EBITDA.

Overall, the businesses of the company are expected to have a mixed quarter. The zinc international business was unable to ramp up production. For oil and gas business, even though the realisations improved, there was a decline in volumes on a sequential basis. Higher realisations of aluminium were negated by higher coal prices.

In the case of Iron ore and steel, lower realisations nullified the effect of higher volumes. Generation and availability of power is likely to be better QoQ.

Phillip Capital expects EBITDA (earnings before interest, tax, depreciation and amortization) to increase by 37 percent on-year to Rs 10,617 crore. On a sequential basis, the growth is 2.5 percent.

The net profit for the quarter is likely to improve by 40 percent on year to Rs 4,616 crore. Compared to previous quarter, there is a marginal decline of 1 percent.

“Aluminium and Zinc-India to drive performance owing to higher LME prices and production ramp up while Zinc-International and oil and gas are likely to remain lacklustre,” expects Edelweiss Research.

Higher power generation is likely to improve the power division's performance but ferrous division is likely to suffer from lower prices, it said.

It forecast a 49 percent on-year and 11.5 on-quarter growth in the consolidated revenues at Rs 33,890 crore. This may result in an EBITDA of Rs 10,268 crore for the quarter, a YoY growth of 32.4 percent and a marginal decline of 1 percent on quarter.

The net profit may climb 31 percent on-year to Rs 4,282 crore but decline by 8 percent compared to previous quarter.

Kotak Institutional Equities, estimates the revenues of Rs 31,309 crore for the quarter, rising by 38 percent compared to same period last year and by 3 percent QoQ.

EBITDA may witness a similar rise of 37 percent on year and 2.6 percent QoQ to Rs 10,628.

“The sequential increase in EBITDA is mainly led by higher EBITDA at Zinc India operations and oil and gas operations, partially offset by lower earnings in the aluminum division,” Kotak said in its report.

It forecasts a 46 percent sequential increase in the EBITDA of Zinc business at Rs 430 crore driven by higher volumes and higher zinc prices.

Aluminum EBITDA may decline 23 percent QoQ to Rs 3,600 crore on lower aluminum prices and higher costs. “We estimate oil and gas division to report EBITDA of Rs 14,200 crore, a growth of 3 percent QoQ, on higher crude prices”, Kotak said.

Steel EBITDA of Rs 80 crore may grow by 25 percent QoQ on higher volumes. “We expect earnings to decline sequentially from iron ore division on lower prices whereas copper division remains shut”, it added.

EBITDA margins are likely to remain flat at 34 percent for the quarter resulting in a YoY growth of 45 percent in PAT at Rs 4,790 crore.

The stock of Vedanta Ltd, closed at Rs 328.2, up Rs 10.2 from its previous close at The National Stock Exchange on January 27. The stock has generated robust returns of 101 percent during the past one year but is down 3.5 percent during the past one month.



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Gaurav Sharma
first published: Jan 28, 2022 08:08 am
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