Vedanta Trades Steady After Reporting Rs 915-Cr Loss in Q2; Brokerages Share Mixed Opinions

On November 6, shares of Vedanta Ltd exhibited minimal movement after the company posted a loss in its September quarter results. The stock was trading at Rs 233 on the BSE, marking a marginal 0.2 percent increase from its previous close.

Vedanta reported a net loss of Rs 915 crore for the July-September quarter, a notable contrast to the net profit of Rs 2,690 crore recorded in the same period the previous year. However, when exceptional expenses were excluded, the company’s net profit stood at Rs 4,403 crore.

The company’s revenue for the quarter increased by 6.4 percent year-on-year, reaching Rs 38,546 crore, marking a new high for the second quarter and a 16 percent sequential increase. The EBITDA margin for Q2 improved to 28.7 percent, up from 20.1 percent in the previous year. Additionally, the EBITDA for 2QFY24 surged by 47 percent to Rs 11,834 crore, attributed to enhanced operational performance, reduced input commodity costs, and a favorable arbitration award, despite lower output commodity prices.

During the quarter, Vedanta successfully reduced its net debt (excluding Hindustan Zinc) by Rs 1,730 crore, bringing it down to Rs 57,770 crore. Vedanta Resources (VRL) has plans to refinance a $1-billion debt maturity due in January 2024 and has approximately $3.1 billion in debt obligations for FY25. The company is strategizing to sell its iron and steel assets as part of its debt repayment plan.

Their primary focus remains on completing the aluminum expansion by FY25. VRL currently retains a 63.7 percent stake in Vedanta, which could potentially be further reduced to 50.1 percent. The proposed demerger is viewed positively, as it offers opportunities for investments in standalone businesses, as noted by analysts.

In their latest report, Nuvama Research expressed a positive outlook on Vedanta, believing that the company will successfully manage its debt. The expected completion of aluminum projects in FY25 is anticipated to significantly enhance cash flows. Furthermore, if the proposed sale of steel and iron ore assets materializes, it will contribute to further deleveraging. The risk-reward ratio is favorable. The brokerage has maintained its ‘hold’ rating on the stock and raised the target price from Rs 249 to Rs 265.

Analysts highlighted that Vedanta’s EBITDA performance, excluding arbitration claims, aligns with their estimates. The company remains committed to reducing debt, and the demerger process is progressing as planned. Motilal Oswal slightly adjusted their FY25 EBITDA estimate downward by 4 percent, taking into account challenges in the global commodity market, including reduced demand from China, a sluggish real estate sector in China, uncertainties in the Middle East, and low LME prices.

Antique Stock Broking emphasized that short-term low commodity prices may impact profitability and anticipates cost-saving measures in FY25. They also pointed out the higher FY24 capex guidance of $1.7 billion, which could potentially limit dividend payouts. Maintaining a BUY rating, they revised the target price to Rs 317 (previously Rs 325), based on a 1HFY26E EV/EBITDA multiple of 4.0x (previously 4.1x FY25), considering lower aluminum prices and sales.

As of 11:21 AM, Vedanta’s stock was trading at Rs 233 on the BSE, showing a modest 0.2 percent increase from its previous close.