In its research report dated October 02, 2023, Motilal Oswal has recommended a “neutral” rating on Vedanta, with a target price of Rs 250.
Vedanta Limited (VEDL) recently announced its plan to undergo a demerger, dividing its existing business verticals into six independent “pure play” companies. The primary objectives of this move include unlocking stakeholder value, attracting strategic investments, enhancing competencies, and ensuring greater transparency in operations. The demerger process is expected to be completed within the next 12-15 months, subject to approvals from shareholders, lenders, creditors, and regulatory authorities.
This proposed demerger will be a straightforward vertical split, where shareholders holding one share in VEDL will receive one additional share in each of the newly listed five entities. VEDL will continue to be listed and will encompass the newly proposed semiconductor and display verticals while also serving as the holding company for Hindustan Zinc Limited (HZL).
Motilal Oswal has reiterated its “neutral” rating on Vedanta and has established a target price of Rs 250 based on the Sum of the Parts (SoTP) valuation method. As of the current market price of Rs 223, the stock is trading at a FY25 estimated Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBITDA) multiple of 4.9x and a FY25 estimated Price-to-Book (P/B) multiple of 2.2x.
Investors considering Vedanta as a potential investment may find Motilal Oswal’s recommendation and target price valuable factors to consider as they make their investment decisions.