JP Morgan Bets On This Quality Diversified Metals Scrip For Multibagger Returns

The stock of Vedanta in a month's time has cracked by 29% and in 3-months this draw-down has been to the tune of 48%. This fall has been more acute after the company declared its first interim dividend of Rs. 31.5 per share for the Fy23.

The fall fundamentally was triggered after the company had put its Sterlite Copper facility in Tamil Nadu on sale. The company in the March ended results for Fy22 posted thrice the net profit a year ago during the same period at Rs. 4157 crore. In the same period last year, net profit stood at Rs. 1441 crore. Further, it achieved the highest ever EBITDA of ₹ 13,768 crores in Q4FY22.

The company lately announced the acquisition of Athena Chhattisgarh Power which is a 1200MW coal-based power plant at Jhanjgir Champa district, Chhattisgarh, and is under liquidation process. The acquisition, which is estimated to be completed in FY23, will fulfill the power requirement at Vedanta aluminium business. The acquisition cost is Rs 564.67 crore.

For the diversified metals company, JP Morgan has given an 'overweight' rating and has given a target price of Rs. 490 per share by March 23.

The brokerage said that zinc inventories have declined to multi-decade lows and Vedanta remains best positioned to play higher LME zinc prices. It added that the downside risks include a sharp decline in LME aluminium and zinc prices, inter-company loans to the parent/transactions with the parent that are negative to minority shareholders; and further delays in oil PSC extension.

Vedanta is a large-cap global diversified natural resource company operating across segments which are Copper; Aluminium; Iron Ore; Power; Zinc, Lead and Silver; Oil and Gas, and Others.