ICICI Securities has reinstated its coverage of Vedanta Ltd. (NYSE:VEDL: IN) (NYSE: VEDL), issuing a Buy rating and setting a price target of INR 600.00.
The firm highlighted Vedanta's strategic focus on volume growth, value creation, and cost reduction, particularly in its aluminum and Zinc-India divisions, as key drivers for the company's future performance.
The recommencement of coverage comes with an optimistic outlook on Vedanta's diverse operations. The analyst noted significant volume growth aspirations across all divisions of Vedanta, with aluminium and Zinc-India divisions being potential catalysts for earnings growth. Additionally, the oil and gas production segment is expected to stabilize by the fiscal year 2026.
ICICI Securities anticipates that Vedanta's growth strategies could contribute to a substantial debt reduction, estimating a decrease of $3 billion over the next three years. The firm also projects that Vedanta's dividend yield could maintain a rate of over 5% per annum.
The financial institution forecasts an impressive EBITDA compound annual growth rate (CAGR) of 25% year-over-year through the fiscal year 2026 and a return on equity (RoE) of 40-45% over the next two years.
The price target of INR 600 is based on a sum-of-the-parts (SoTP) valuation, which implies an enterprise value to EBITDA (EV/EBITDA) multiple of 5.7 times on fiscal years 2026 and 2027 estimated EBITDA, with equal weight given to both years.
In other recent news, brokerage firm CLSA continues to hold a favorable outlook on Vedanta, maintaining its Outperform rating and INR520.00 price target. This stance is based on the belief that Vedanta's share price has not yet caught up with the recent surge in metal prices, a trend CLSA expects to reverse. The firm's analysis suggests that the current valuation does not fully account for Vedanta's ongoing margin expansion projects and the recent increase in metal prices.
Furthermore, CLSA notes that Vedanta's recent corporate actions, including the stake sale in Hindustan Zinc and the issued dividend, are anticipated to aid in the company's debt reduction efforts. These strategic moves are considered beneficial for Vedanta's financial health and contribute to the sustained Outperform rating.
Adding to the positive outlook, CLSA underscores Vedanta's high dividend yield as an appealing aspect for investors. The brokerage firm shows a preference for base metal stocks over ferrous ones, indicating a broader optimistic view on the non-ferrous metals sector.
InvestingPro Insights
Complementing ICICI Securities' bullish outlook on Vedanta Ltd., recent data from InvestingPro reveals some intriguing financial metrics. Vedanta's market capitalization stands at $23.11 billion, reflecting its significant presence in the mining and metals sector. The company's revenue for the last twelve months as of Q1 2025 was $17.27 billion, with a modest growth of 2.19% over the same period.
Notably, Vedanta boasts a robust gross profit margin of 51.08%, indicating strong operational efficiency. This aligns with ICICI Securities' emphasis on the company's cost reduction strategies. Furthermore, the EBITDA growth of 24.12% over the last twelve months supports the analyst's projection of a 25% CAGR through fiscal year 2026.
InvestingPro Tips highlight Vedanta's attractive dividend yield of 9.19%, surpassing ICICI Securities' projection of over 5% per annum. Additionally, the company's stock has shown remarkable performance, with a 153.26% total return over the past year.
These insights from InvestingPro provide additional context to ICICI Securities' analysis, reinforcing the potential for value creation in Vedanta's diverse operations. Investors seeking more comprehensive analysis can access 15 additional tips for Vedanta on InvestingPro, offering a deeper understanding of the company's financial health and market position.
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