Buy Vedanta; target of Rs 350: Edelweiss

Edelweiss' research report on Vedanta

In a positive development, the Odisha State Pollution Control Board (SPCB) has revoked closure of Vedanta’s (VEDL’s) 2x135MW and 1x60MW plants at Jharsuguda. Management mentioned that VEDL will now not need to source external power to meet its operating requirements and expressed hope that the closure order for the remaining plants would also be lifted soon.  We had highlighted possibility of quick resolution of the issue in our note Vedanta - Partial closure of power plants: Marginal impact; event update; BUY. We maintain ‘BUY’ with an unchanged target price of INR350, implying an exit multiple of 4.6x FY19E EBITDA.

Outlook

We are upbeat on the partial revocation of closure of VEDL’s power plants at its Jharsuguda plant. We believe that in-house generation will cater to requirements of the smelter and any adverse impact arising from external power purchase is less likely.  We maintain ‘BUY/SO’ with a target price of INR350 (4.6x FY19E EBITDA). At CMP, the stock is available at 4.3x FY19E.