In the view of brokerage and research firm Edelweiss, Vedanta’s EBITDA uptrend is its major strength behind higher volumes, despite lower commodity prices. EBITDA is growing 15% through FY25E on average factoring in higher volume estimates for brokerage Vedanta.
It assumes that EBITDA, ESG and dividends are among the many factors to be happy about. VedantaMaintaining your buy rating on the stock and raising your target price 355 each (from above 265).
Edelweiss analysts met Sunil Duggal, CEO, Vedanta (VEDL), to gain insight into the company’s strategic initiatives, ESG efforts and growth prospects. The key points of the meeting were that the aluminum and zinc divisions are key growth drivers, efforts are underway to boost production in the O&G business, and remain committed to ESG benchmarks better than the industry. During the interaction, Duggal mentioned that Vedanta has an edge- all its divisions are prime for growth and this will significantly increase its EBITDA over the next few years.
“We find that Vedanta’s aggressive ESG approach and prudent capital allocation framework are the key differences. Key findings: i) Firm decarbonization (incorporating green aluminum and copper), water positivity and waste management targets. ii) There is a possibility of reduction of debt on the parent through upstreaming of dividends without the intention of intercorporate deposits (ICDs). iii) Committed to deleveraging $4 billion in VRL iv) Disciplined capital allocation structure balancing both growth and cash returns. We get a three-pronged focus on earnings growth, ESG and cash returns.”
Edelweiss has raised its volume growth forecast across all divisions, resulting in 15-16% growth in EBITDA in FY23-25E. Further, it expects Vedanta Ltd to deliver a better RoE of 25 on an average of 31% through FYE (global diversified player at 20%). It has kept the valuation multiple unchanged at 4x – similar to other diversified global players.
Shares of the company fell 9% on Friday, breaking six days of gains, after manufacturing business family trust Volcan Investments Ltd came under the purview of the Mumbai-listed firm, as reported by Bloomberg.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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