Mining major Vedanta saw a series of price target upgrades as the mining conglomerate's cost-saving initiatives and growth plans fueled optimism among brokerages.
The Vedanta group organised a site visit to its aluminium plant at Jharsuguda, Odisha, and zinc mines and smelter at Dariba, Rajasthan for analysts and fund managers last week in an attempt to showcase its plan to record a $10 billion EBITDA (earnings before interest, tax, depreciation and amortisation) in the near term.
To achieve its goal, Vedanta is executing over 50 high-impact growth projects, including in zinc, aluminum, oil and gas and power.
The planned $10-billion near-term EBITDA includes $4.2 billion from aluminium, $2.7 billion from zinc and silver, and $0.9 billion from oil and gas.
What brokerages say
According to brokerages, Vedanta is operating with a technologically advanced asset base and is striving to reduce costs across its businesses through backward integration, operational efficiencies, and captive power usage (including renewables).
"The capex plans are progressing well to drive the next level of growth for the company," added Motilal Oswal.
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The higher premiums for aluminium and zinc, lower aluminium cost of production (CoP) and improving operational efficiency will boost Vedanta's bottom line, while increasing volume growth .
The aluminium segment is poised to record volumes of 3.1 MMT with an EBITDA/tonne of $1,350. This improvement will be a result of cost- rationalisation efforts, which include coal-block commissioning, higher captive linkage, and improved efficiency.
International brokerage CLSA noted that the aluminium segment will be a key value driver through capacity additions, cost control and a change in mix.
On zinc , Hindustan Zinc will target 1.2 MT of zinc production with $1,000/tonne of CoP, with plans to increase it to 2 MT in the long term. However, improved earnings from zinc and oil are likely to be gradual and will be closely watched, said CLSA.
Vedanta's demerger plans are likely to be completed by the end of FY25, and this will unlock value for minority shareholders. Nuvama Institutional Equites said, "We understand Vedanta is at the fag end of receiving lenders’ approval, which will facilitate its vertical demerger
process."
CLSA maintained its buy call on the stock, with a target price of Rs 520 per share, up from Rs 430 apiece. This implies an upside of 16 percent from the previous close. Nuvama Institutional Equites retained its buy call with a revised price target of Rs 644 per share, indicating an upside of 44 percent.
"We raise our EBITDA estimates by 20 percent/23 percent for FY25/26, considering the various cost-reduction initiatives being undertaken by the management," said Motilal Oswal. The brokerage kept its neutral rating on Vedanta, with a revised price target of Rs 500.
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