Buy This Metal Stock For Good Dividend & Strong Return

Vedanta Limited, a subsidiary of Vedanta Resources Limited, is one of the world's major oil and gas and metals companies, with extensive activities in India, South Africa, and Namibia in the sectors of oil and gas, zinc, lead, silver, copper, iron ore, steel, aluminium, and power. The firm said on Wednesday that its board of directors has authorised a third interim dividend of Rs 13 per equity share on the face value of Re 1 per share for the fiscal year 2021-2022, totaling Rs 4,832 crore, with the record date for the payment being March 10, 2022. Following the release of the company's Q3FY22 earnings, brokerage firm Geojit issued a buy call with a target price of Rs. 407 and a 12-month target term.

Q3FY22 results of Vedanta

As per the brokerage "Revenue grew 49.8% YoY to Rs. 33,697cr in Q3FY22 (+12.1% QoQ) driven by increased volumes across all segments, particularly with aluminum and zinc segments delivering record levels of growth. Despite higher input costs, the company reported the highest quarterly and nine-month revenue backed by favorable sales realizations due to rise in prices of zinc and aluminum. Aluminum revenue surged by 76.5% YoY, and with metal production rising to 578kt in Q3FY22 (+16% YoY). Sales of zinc, lead and silver (together accounting for 26% of revenue), grew 32.5% YoY to Rs. 8,896cr. This was majorly driven by domestic zinc and lead sales which increased by 42% YoY, with domestic zinc refined metal production rising to 261kt (+11% YoY)."

According to Geojit "EBITDA rose 38.5% YoY to Rs. 10,742cr, despite contraction in EBITDA margin (- 260bps YoY to 31.9%) impacted by steady rise in cost of materials owing to inflation. Aluminum COP was at US$ 2,055/t, due to higher commodity prices and power costs. Overall, adj. PAT increased 27.3% YoY to Rs. 4,201 cr. In Dec-2021, the company acquired Nicomet, a leading nickel and cobalt producer. With this acquisition, Vedanta became the sole producer of Nickel in India. The company is considering a potential restructuring of the overall mining operations. This may include demerger and listing of its aluminum, iron and steel, and oil and gas businesses as separate standalone entities."

Buy for a target price of Rs. 407

The brokerage has claimed "Despite margin pressure, the company generated record revenues and highest-ever EBITDA in Q3FY22. The steady growth in both - volumes and metal prices - along with optimum utilisation of capacity should translate to strong growth across verticals in coming months. Furthermore, company's foray into mining of critical minerals such as nickel and cobalt with significant potential in the manufacturing of stainless steel and lithium-ion batteries for EVs bodes well for future growth. Hence, we remain optimistic on company's outlook and reiterate our BUY rating on stock with a rolled forward target price of Rs. 407, based on 4.5x FY24E EV/EBITDA."

Disclaimer

The stock has been picked from the brokerage report of Geojit. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.