Buy Vedanta; target of Rs 288: Edelweiss

Edelweiss' report on Vedanta

VEDL reported a pot outage incident earlier this week at Jharsuguda-I smelter (500ktpa) due to short circuit, resulting in 228 pots of 608 being taken out of production. In our view, it will take at least 3-4 months for the pots to get operational and capacity ramp up. Ergo, we estimate FY18 production to be lower by 50-65kt (FY17: 525KT).

Outlook

We have pruned FY18E EBITDA slightly taking into account the impact of outages, change in exchange rate, dividend similar to FY17E and upward revision in HZL’s estimates following Q4FY17 result. Ergo, our target price is revised down to INR 288 (earlier INR 300), implying an exit multiple of 5.6 FY19E EBITDA.