1:6 Split Soon: Metal Giant Vedanta Announces Q4 Results Data; Key Factors To Watch, BUY OR SELL?

Billionaire Anil Agarwal-backed metal behemoth Vedanta Ltd has announced the date of its Q4 and full-year results for FY24. However, Vedanta which is the largest dividend yield stock in the largecap basket, has not revealed anything related to dividend recommendations. Among key things to watch out in Q4 from Vedanta will be the development on a 1:6 demerger of its business and the deleveraging of parent Vedanta Resources.

In its regulatory filing, Vedanta announced that "we wish to inform you that the meeting of the Board of Directors of the Company will be held on Thursday, April 25, 2024, to inter‐alia consider the Audited Financial Results of the Company for the Fourth Quarter and Year ended March 31, 2024."

While Vedanta's earnings are scheduled for next week, the company has declared the Q4 earnings of its subsidiary Hindustan Zinc on April 19.

In Q4FY24, Hindustan Zinc's revenue from operations during the quarter was Rs 7,549 Crore, up 3% q-o-q on account of better zinc volumes partly offset by lower lead & silver volumes, and lower metal prices. The revenue plunged by 11% y-o-y on account of significantly lower zinc & lead prices and lower lead volume, partly offset by increased zinc & silver volumes, silver prices and favourable exchange rates.

While Hindustan Zinc's net profit for the quarter stood at Rs 2,038 Crore, marginally up sequentially and down 21% y-o-y. FY24 net profit was at Rs 7,759 Crore, down 26% y-o-y, primarily on account of lower EBITDA partly offset by lower tax expense.

Both Vedanta and Hindustan Zinc are the top performers in a month on NSE. In 30 days, Vedanta's share price surged by 41%, while Hindustan Zinc zoomed over 35%.

On April 19th, Vedanta shares stood at Rs 384.90 apiece after touching a new 52-week high of Rs 396.75 apiece during the trading hours.

Earlier, last week, in a note, Agarwal said that FY25 is going to be a transformative year for the company on many fronts as it prioritizes disciplined growth, operational excellence and exploring opportunities along the value chain. He further revealed that Vedanta's demerger is going to be completed by December 2024-end. Further, he reiterated Vedant's goal of achieving Group EBITDA of $7.5 billion within two years and deleveraging its parent Vedanta Resources by $3 billion in the next 3 years.

Last year, in September, Vedanta announced the creation of a demerger of metals, power, aluminium, and oil and gas businesses to unlock potential value. After the exercise, six independent verticals - Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Steel and Ferrous Materials, Vedanta Base Metals and Vedanta Limited - will be created.

Under the demerger, for every share of Vedanta, shareholders will receive one share of each of the five newly listed companies. After the demerger, the businesses of Hindustan Zinc as well as the electronics business will remain with Vedanta Limited.

Vedanta Q4 Results Preview:

In its preview note for the sector, Kotak Institutional Equities has said, "We forecast a 9.4% yoy decrease in EBITDA (-0.8% QoQ) due to weaker commodity prices across major segments, particularly in zinc."

Kotak's note added, "We forecast (1) Aluminum EBITDA to marginally increase qoq by 0.2% (+49% yoy) primarily led by lower costs (2) Oil and Gas division to witness an EBITDA decline of 4.5% qoq on lower volumes (3) Zinc India division to see 0.6% qoq decrease in EBITDA on the back of lower zinc prices partially offset by improved volumes."

Kotak has suggested SELL for a fair value of Rs 255.

Meanwhile, Vedanta has met CLSA's target in less than 2 weeks. Global brokerage CLSA earlier upgraded its rating on Vedanta to 'BUY' from earlier 'Reduce'. While maintaining a positive outlook, the brokerage also raised its target price on Vedanta to Rs 390 per share.

For FY24, Vedanya posted the highest-ever cast metal aluminium production of 2,370 kt at its smelters up 3% YoY. Vedanta posted the best-mined metal production at 1,079 kt up 2% YoY, driven by improved mined metal grades. Refined metal also achieved its highest annual production.

Further, Vedanta's mined metal production was at 299 kt, up 11% QoQ, driven by a mix of improved mined metal grades and higher ore production across mines. Further, Vedanta recorded the highest-ever quarterly refined metal production at 273 kt, up 6% QoQ on account of better plant availability and up 1% YoY. Refined zinc production was at 220 kt, up 9% QoQ & 2% YoY. Refined lead production at 53 kt, lower 2% YoY and 5% QoQ.