Buy Vedanta; target of Rs 425: Edelweiss

Edelweiss' research report on Vedanta

VEDL has trimmed its gross debt by INR 115bn YTD FY18. Net debt came 18% lower QoQ to INR 15.6bn due to free cash flow generation of INR46bn in Q2FY18. Average cost of borrowings too dipped by 70-80bps due to improved credit profile, resulting in lower interest cost at INR 13.8bn.

Outlook

Despite EBITDA miss in Q2FY18, we believe VEDL will benefit from firm base metal prices and operating leverage. Deleveraging will also further enhance shareholders’ value. At CMP, the stock trades at 4.2x FY19E EBITDA. Maintain ‘BUY/SO’ with unchanged TP of INR 425, implying exit multiple of 5.0x FY19E EBITDA.