Neutral Vedanta; target of Rs 220: Motilal Oswal

Motilal Oswal's research report on Vedanta

In 2QFY24, VEDL received a one-time revenue and EBITDA gain of INR47.6b related to the award of the final partial arbitration that VEDL has won in relation to a contract for Rajasthan Block. For a like-to-like comparison, we have adjusted 2QFY24 financials by excluding this one-time gain.  Revenue stood at INR341b (up 6% YoY) and was 5% above our estimate of INR325b. Consolidated EBITDA stood at INR67b, in line with our estimate of INR65b. EBITDA was supported by improved operational efficiency and favorable input prices, which were partially offset by lower commodity prices and strategic hedging gains. Among segments, aluminum, steel and iron-ore businesses saw strong improvements in EBITDA, whereas Zinc India, Zinc International and copper verticals saw pressure on EBITDA.  APAT stood at INR5b vs. our estimate of INR12b. Net debt stood at INR577b and net debt/EBITDA stood at 1.64x in 2QFY24 vs. 1.98x in 1QFY24.

Outlook

We reiterate our Neutral rating on VEDL with an SoTP-based TP of INR220. At CMP of INR233, the stock is trading at FY25E EV/EBITDA of 6.3x and FY25E P/B multiple of 3.2x.