Billionaire Anil Agarwal-backed Vedanta stock has seen fruitful gains in 2024 so far, and its Q4 results emerged as another trigger for the upside as this metal giant crossed Rs 400 by the end of Apri 26 and stayed around the position. Vedanta is on the move to demerger into the ratio of 1:6, while its focus has been to enhance EBITDA by developing debts of parent Vedanta Resources. Following this, three brokerages have made recommendations, and only one namely Centrum has recommended buying for a target over Rs 430.
Vedanta Earnings:
The company posted consolidated revenue of Rs 34,937 crore, flat sequentially, while its EBITDA rose by 3% QoQ to Rs 8,969 crore with an EBITDA margin of around 30%. PAT excluding exceptional items in Q4FY24, came in at Rs 2,453 crore. Further, Vedanta recorded a decline of 10% in its net debt to Rs 56,338 crore.
It said, "Deleveraging of Rs 6,155 crore QoQ, significantly improved Net Debt/EBITDA to 1.5x from 1.7x."
Meanwhile, in FY24, the company posted the second-ever ever-highest annual consolidation revenue of Rs 141,793 crore, while EBITDA also came second-highest ever to Rs 36,455 crore, up 3%. In the fiscal, EBITDA margin improved to 30%, up ~240 bps. Vedanta also said that it posted the highest dividend yield of 17% per annum (5-year average), which is 10 times higher than Nifty 50 companies. Accordingly, Vedanta paid Rs 18,572 crore dividend in FY24.
Ajay Goel, Chief Financial Officer, Vedanta, said "Driven by operational excellence, Vedanta achieved outstanding financial results, marking the second highest annual revenue and EBITDA in our history, reaching ₹1,41,793 crore and ₹36,455 crore respectively. Through continued cost optimization, we achieved a remarkable EBITDA margin of 30% in FY24 with ~240 basis points annual margin expansion, underscoring our efficiency and agility. Moreover, our net debt/EBITDA ratio improved to 1.5x from 1.7x in December 2023. At Holdco, we deleveraged by $1.6bn in FY24 & through successful liabilities management, Vedanta has a balanced capital structure, and will remain committed towards value creation."
Vedanta On Path For Value Creation:
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.
The 1:6 Split Of Vedanta! 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.
Vedanta Share Price:
Vedanta shares stood at Rs 396.65 apiece on April 26, up by 4.16% on BSE with a market cap of Rs 1,47,442.60 crore. During the trading session of Friday, Vedanta stock touched a new 52-week high of Rs 402.95 apiece, more than doubling from its 52-week low of Rs 207.85 apiece.
Vedanta Share Target Prices:
Motilal Oswal On Vedanta:
VEDL performance in 4QFY24 came largely as anticipated across segments. Extending the maturity of bonds at HoldCo. by three years offers the company adequate liquidity comfort in the near term. The Capex plans are progressing well which would lead to further cost savings.
VEDL currently trades at 6.9x FY26E EV/EBITDA. We marginally increase our EBITDA estimates by 4% in FY26 to incorporate the improving outlook. We reiterate our Neutral rating on VEDL with a revised SoTP-based TP of INR360.
Kotak Institutional Equities On Vedanta:
VEDL 4QFY24 consolidated EBITDA came 4% above our estimates mainly led by higher margins in the oil & gas division. VEDL's expansion projects in the aluminium division-smelter, refinery and captive coal mines should be completed in stages over the next 12-18 months, a key growth driver over FY2025-26E.
Management is focused on deleveraging the parent entity (VRL) significantly for the next three years, which has been a key overhang in recent years. We increase EBITDA by 14%/17% for FY2025/26E and FV to Rs320/share on the back of higher commodity prices. Maintain SELL.
Centrum On Vedanta:
For Q1FY25, we expect a sharp increase in commodity prices to aid strong growth in the zinc and aluminium segment driving overall earnings growth. VEDL is set to level up across businesses through capacity expansion and cost savings through backward integration will drive margin improvement and earnings growth.
We expect zinc India and aluminium (73% of EBITDA) to grow by 18% and 30% CAGR over FY24-26. Despite a huge dividend payout of Rs45/sh each and capex outlay of ~USD2bn each in FY25 and FY26, we expect strong earnings visibility will help to generate strong FCF to deleverage net debt position by ~USD1.4bn. We upgraded to BUY rating with a TP of Rs438, based on FY26 SoTP.
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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