ICICI Direct is bullish on Vedanta has recommended buy rating on the stock with a target price of Rs 350 in its research report dated May 08, 2018.
ICICI Direct's research report on Vedanta
Vedanta reported a better-than-expected operational performance driven by the Zinc India (Hindustan Zinc) and aluminium operations. The consolidated topline came in at Rs 27630 crore (up 22.7% YoY, 13.4% QoQ) and higher than our estimate: Rs 24818.5 crore. The consolidated EBITDA came in at Rs 7837 crore (up 6.6% YoY, 15.9% QoQ, our estimate of Rs 6974.6 crore). The corresponding EBITDA margin was at 28.4 (vs. our estimate: 28.1%) Among business verticals, Vedanta’s domestic zinc business (Hindustan Zinc) reported EBITDA of Rs 3620 crore (our estimate: Rs3342 crore) and EBITDA margin of 57.7% (our estimate: 54.3%). Aluminium segment also reported a good performance wherein EBITDA came in at Rs 1310 crore (up 32% YoY, 115% QoQ, EBITDA margin of 18.3%) The company reported exceptional gains to the tune of Rs 2869 crore on reversal of earlier impairment in the oil & gas business. The company reported other income of Rs 993 crore. The ensuing reported PAT came in at Rs 4802 crore. While the adjusted attributable PAT (before exceptional and before DDT) was at Rs 2420 crore.
Outlook
For FY18, the company reported a healthy topline and EBITDA growth of 27.2% and 18% on a YoY basis, respectively, primarily on the back of higher volume and LME prices. We believe the company’s expansion plan in its zinc and oil & gas verticals augur well. We expect the company to report a healthy performance over the next couple of years wherein the EBITDA is likely to grow at a CAGR of 18% in FY18-20E. We value the company using SOTP valuation and arrive at a target price of Rs 350. We maintain our BUY recommendation. Vedanta’s healthy balance sheet and prudent capital allocation strategy augur well for the long term.
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