Analysts eye up to 53% upside in Vedanta share after Q3; CLSA ups target

Brokerages are generally positive on mining major Vedanta's performance after Q3 results in FY25, with most maintaining a ‘Buy’ or ‘Outperform’ rating, though target prices vary. 

 

The main drivers for Vedanta's positive outlook cited by analysts include strong performance in the aluminium, zinc, and oil segments, cost management efforts, and the ongoing capex plans. Most analysts also recognise Vedanta's progress in deleveraging and managing debt.

 

However, there are differing views on the extent of future earnings growth, with some analysts (like Nuvama) focusing on the potential impact of the demerger, while others (like Emkay) highlight the positive outlook for aluminium and zinc prices.  

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Following the results on Friday, January 31, 2025, Vedanta share price rose as much as 2.69 per cent to hit an intraday high of Rs 443.95 per share, before settling 2.11 per cent higher at Rs 441.40. In comparison, BSE Sensex closed about 0.97 per cent higher at 77,500.57.

 

Nuvama noted that higher aluminium prices helped offset the increased alumina costs, boosting Vedanta's aluminium Ebitda per tonne on a quarter-over-quarter basis. In addition to the strong aluminium performance, the company saw further gains from its zinc, iron ore, and oil businesses. As a result, Vedanta's consolidated Ebitda rose 13 per cent Q-o-Q to Rs 11,100 crore, surpassing the estimate of Rs 10,470 crore. However, net debt, excluding HZ and including buyers' credit, increased Rs 2,000 crore to Rs 69,500 crore.

 

Looking ahead, Nuvama expects Vedanta's Q4FY25 Ebitda to rise more than 10 per cent Q-o-Q, supported by firm prices and lower cost of production in aluminium and zinc. While a drop in alumina prices is anticipated to impact results in Q1FY26, analysts predict the company will complete its demerger by the end of Q1FY26, pending approval from lenders and equity shareholders on February 18, 2025. 

 

Thus, Nuvama maintained its target price of Rs 663, based on FY27 estimates, excluding a dividend payout of Rs 35 and Rs 30 in FY26 and FY27, respectively, and reiterates its 'Buy' rating.

 

Emkay also praised Vedanta's steady Q3 performance, with Ebitda, exceeding both Emkay's and consensus estimates. The positive surprise was largely driven by lower-than-expected power costs in the aluminium segment, although alumina costs were slightly higher. Other strong contributors included better recoveries in zinc and strong earnings from the oil & gas segment. 

 

During the earnings call, the company stressed upon its focus on reducing holdco debt costs and plans to develop captive bauxite and coal mines in FY26, with alumina refinery expansions on track to cover 70 per cent of FY26 requirements, which should result in cost reductions. Considering these aspects, Emkay revised its target price down by 4.2 per cent to Rs 575, but still retains a 'Buy' rating.

 

Motilal Oswal analyst noted that Q3FY25 performance was in-line, with strong capex progress expected to drive cost savings. The company aims for robust earnings growth through increased VAP product capacity and continued deleveraging. Despite maintaining estimates, the stock trades at 4.9x FY27E EV/Ebitda, leading to a ‘Neutral’ rating. The target has been reduced to Rs 500.

 

Firm commodity prices will support near-term topline growth, while backward integration in aluminum will gradually roll out over FY26 with bauxite, coal mines, and higher captive alumina, analysts at Antique Stock Broking said. Higher capex and dividend payouts may limit deleveraging in the short-term. 

 

The demerger scheme is nearing completion, with shareholder and creditor meetings on February 18. While the demerger will unlock value in aluminum, it may reduce the oil and gas segment’s multiple. Thus, analysts at Antique Stock Broking maintained a ‘Hold’ rating, with an increased target price of Rs 491, to reflect Q3 results.

 

CLSA maintained an optimistic view, with an ‘Outperform’ rating and a target price of Rs  530 (up from Rs 520 previously), according to reports. The firm stressed upon the importance of project commissioning for earnings growth, noting that Vedanta's leverage is under control. With high dividend yields expected and continued profitability in Q4, CLSA sees positive momentum for the company.

 

Among other brokerages, Citi has maintained a ‘Buy’ rating with a target price of Rs 500, while JPMorgan has maintained a ‘Neutral’ rating for a target price of Rs 500. Investec hasa  ‘Hold’ rating with a target of Rs 510, Bloomberg data showed.

 

Vedanta Q3 results 

 

Vedanta’s profit rose 76.2 per cent Y-o-Y to Rs 3,547 crore in Q3FY25, from Rs 2,013 crore in Q3FY24. Revenue soared 10.1 per cent Y-o-Y to Rs 39,115 crore in Q3FY25, from Rs 35,541 crore in Q3FY24. 

 

At the operating front, Ebitda rose 30.2 per cent Y-o-Y to Rs 11,104 crore in Q3FY25, from Rs 8,531 crore in Q3FY24. Ebitda margin expanded 440 basis points (bps) to 28.4 per cent in Q3FY25, from 24 per cent in Q3FY24.