Target: ₹355
CMP: ₹314.10
We met with Mr Sunil Duggal, CEO of Vedanta (VEDL), to get insights into the company’s strategic initiatives, ESG endeavours and growth prospects.
Key points: The aluminium and zinc divisions are the key growth drivers; Efforts are underway to boost production in O&G business; Committed to superior-to-industry ESG benchmarks.
Despite our assumption of progressively declining commodity prices, Vedanta stands to gain from volume uptick across its Al, Zinc, O&G and ferrous divisions, and backward/forward integration in the Al division. This is likely to enable superior cash generation and earnings uptick through FY25.
During the discussion, Duggal seemed confident of a significant earnings uptick over the next few years, and reiterated Vedanta’s focus on ESG and a disciplined capital allocation framework.
In our view, Vedanta’s EBITDA uptick on the back of higher volumes, despite low commodity prices, is its key strength. We are raising EBITDA by 15 per cent through FY25 on average factoring in higher volume estimates. Our revised TP works out to ₹355 (up from ₹265) at an unchanged 4x EBITDA as we roll over the valuation to Q3FY24.