Vedanta Q2 review: Top brokerage firms see solid double-digit upside; here’s what they say

At first glance, it seems the market had set a high bar for Vedanta's September-quarter results. Despite beating estimates, the stock dipped around 1 per cent on Monday, November 11, hinting that investors may have expected even more.

Vedanta’s share price opened at ₹460.50, slightly above its previous close of ₹457.90, and fluctuated throughout the day, reaching an intraday high of ₹461.90 and a low of ₹453.10 on the NSE, with swings of around 1 per cent in both directions. Around 2:15 pm, the stock traded 0.75 per cent lower at ₹454.45 on NSE.

The stock has seen a solid gain of about 93 per cent on the NSE over the last year. It hit a 52-week high of ₹523.65 on September 30 this year and a 52-week low of ₹230.75 on November 30 last year.

Vedanta Q2 result

As Mint reported earlier, the company on Friday, November 8, reported a consolidated net profit of ₹5,603 crore for the fiscal's second quarter ended September (Q2FY25) against a net loss of ₹915 crore in the year-ago period (Q2FY24). The firm's consolidated net profit (attributable to Owners of Vedanta Limited) stood at ₹4,352 crore versus a net loss of ₹1,783 crore.

EBITDA increased by 44 per cent to ₹10,364 crore, attributed to favourable commodity prices, efforts in structural cost savings, and higher premiums across various business segments, according to the company.

Brokerages upbeat about the stock

Vedanta's Q2 earnings have sparked optimism among top brokerage firms, with many anticipating strong upside potential for the stock and some raising their target prices.

Nuvama Wealth Management

Target price for Vedanta: ₹663 | Upside potential: 45%

Vedanta remains one of the top picks of Nuvama Wealth. The brokerage firm said Vedanta’s portfolio of resources business provides advantages of scale, diversification and a strong balance sheet. "The company benefits from ownership of low-cost, cash-rich zinc-lead-silver (Zinc India) businesses. It has globally competitive unit production costs in zinc, led by its quality captive mines.

"We believe that future growth will likely be delivered by volume uptick in key divisions: aluminium, zinc, and steel and cost efficiencies at aluminium operations," said Nuvama.

The brokerage firm pointed out that in Q2FY25, better-than-expected cost control at its aluminium and zinc operation helped Vedanta offset weakness in metal prices.

"Even after factoring in higher alumina price, we maintain FY25E EBITDA and increase FY26E EBITDA by 3 per cent to factor in higher silver prices and aluminium cost of production. With a demerger of business likely by FY25-end, we are valuing individual businesses separately. A partial rollover to FY27 yields a target price of ₹663 from ₹608 earlier," said Nuvama.

ICICI Securities

Target price for Vedanta: ₹600 | Upside potential: 31%

ICICI Securities observed that Vedanta’s Q2FY25 EBITDA of ₹98.2 billion was ahead of its as well as consensus estimates.

The brokerage firm has lowered its FY25 estimates by 6 per cent on the sharp spurt in alumina prices but keeps FY26E EBITDA broadly unchanged.

"We are positive about the progress made by Vedanta’s management on the cost front at both the Aluminium and Zinc-international divisions. Further, efforts to arrest the production decline at oil and gas are in full swing, complimented by an increasing proportion of (more profitable) OALP wells. Besides operating efficiencies, we are also positive on accelerated debt reduction at the parent, progressively lower interest cost and ease in serviceability through dividend and branding fee," said ICICI Securities.

"We prune our FY25E EBITDA by 6 per cent, largely taking a more conservative view of alumina’s cost, but retain our FY26E EBITDA. Our SoTP-based valuation methodology yields a target price of ₹600, implying an EV/EBITDA of 5.7 times on FY26E and FY27E blended EBITDA (50 per cent weight each)," ICICI Securities said.

Phillip Capital

Target price for Vedanta: ₹537 | Upside potential: 17%

Phillip Capital continues holding its positive outlook on the company as it believes the commodity prices have legroom to improve from here aided by Fed rate cuts and potential stimulus in China.

"The demerger of business rating upgrades will augur well for the company. With debt-related issues largely settled in the medium term, the company continues to focus on growth and guiding for $ 7.5-10 billion of EBITDA in future (we have taken a conservative stance at nearly $6 billion)," said Phillip Capital.

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