Buy Vedanta; target of Rs 309: Edelweiss

Edelweiss' research report on Vedanta
Vedanta’s (VEDL) Q1FY18 EBITDA at INR 48.7bn missed consensus by 8% due to higher cost at zinc (Zn) India and aluminium (Al) divisions. Going forward, we expect the performance to improve on operating leverage benefits at Al and Zn divisions amidst firm LME prices. It is noteworthy that despite the EBITDA miss, VEDL pruned gross debt by INR62bn in Q1FY18, followed by another INR25bn in Q2FY18. At CMP, the stock is trading at 3.9x FY19E EBITDA, at a discount to global peers, which are trading at 6-7x.

Outlook

Taking cognizance of Q1FY18 performance we trim FY18E/FY19E EBITDA 3%/2% and TP to INR309, implying an exit multiple of 4.4x FY19E EBITDA. We maintain ‘BUY/SO’.

27-07-2017-11