What Analysts Have To Say About Vedanta’s Fourth-Quarter Performance
An employees closes a guard to an electrolytic cell in the reduction unit of the Vedanta Ltd. Aluminium Smelter in Jharuguda district, Odisha, India. (Photographer: Dhiraj Singh/Bloomberg)

What Analysts Have To Say About Vedanta’s Fourth-Quarter Performance

Shares of Vedanta Ltd. swing after the mining conglomerate posted its first quarterly loss in nearly five years. Yet, analysts maintained their stance on the company on better-than-expected performance by its aluminium division.

Net loss stood at Rs 12,521 crore in the quarter ended March compared with a profit of Rs 2,615 crore in the year-ago period, according to an exchange filing. That was mainly on account of a one-time exceptional loss of Rs 17,132 crore due to impairment in oil and gas business, triggered by a plunge in crude price amid the Covid-19 pandemic.

The company’s operating profit, however, met estimates. Higher sales and lower production costs of aluminium and a weaker rupee offset increased operational costs at its zinc and oil and gas subsidiaries.

Vedanta’s stock fell as much as 3.8% in opening trade but soon rebounded to trade 3% higher. It again pared some of the gains to trade flat at Rs 105.90 apiece. In comparison, the Nifty 50 Index is up 1.54%.

Also read: Vedanta Q4 Results: One-Time Impairment Charge Triggers First Quarterly Loss In Five Years

Here’s what brokerages have to say about Vedanta’s fourth-quarter performance:

CLSA

  • Raises rating to ‘outperform’ from ‘underperform’; hikes target price from 80 to Rs 95 apiece.
  • Operational results in line with estimates but one-off impairment weighs on profit after tax.
  • Vedanta deferred its dividend declaration despite dividend income from Hindustan Zinc.
  • Strong aluminium segment offsets weakness in other segments.
  • High leverage, weak zinc and oil volume, exposure to multiple commodities make fundamentals weak.
  • Delisting progress could support the stock.

BoFA Securities

  • Maintains ‘no rating’.
  • Positive cost surprise in aluminium; oil and gas disappoints on volumes.
  • Factors significant production ramp up of zinc over the next two years
  • Volume growth in zinc, oil and gas, cost efficiencies in aluminium division remain critical for earnings upside.
  • Stock is no longer trading on fundamentals following delisting offer.

ICICI Securities

  • Maintains ‘hold’ rating but cuts target price to Rs 110 from Rs 130 apiece.
  • Aluminium delivers on cost savings.
  • Attributes 50% of the valuation to book and hence, any large write-down impacts valuation.
  • This write-down has about Rs 30 per share of impact on the book value (net of taxes).
  • Impacts valuation estimate by about Rs 8 a share.

Motilal Oswal

  • Maintains ‘neutral’ rating.
  • Ebitda in line with estimates but profit after tax higher than estimate due to lower finance cost.
  • Share of Hindustan Zinc and oil and gas Ebitda—the lowest in four years.
  • Lower commodity prices impact earnings.

HSBC

  • Maintains ‘hold’ rating with a target price of Rs 110 apiece.
  • Fourth quarter Ebitda was in line as lower input costs boost aluminium margin.
  • FY20 was the third time in the past six years that company posted large losses due to impairments in the oil and gas assets.
  • Focus remains on delisting process with shareholder approval awaited.
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