Vedanta’s shares closed at ₹ 455.20 on Wednesday. CLSA has assigned a target price of ₹ 520, which reflects a 14% gain from these levels.
A recent report from foreign brokerage CLSA maintained an ‘Outperform’ rating on Vedanta Ltd with a target price of ₹ 520. The stock has been a laggard compared to its peers and has not reflected the recent rise in metal prices in the last month. CLSA thinks this may change soon. Vedanta’s shares gained 1.4% in the last month and are up 77% so far this year.
CLSA stays positive on Vedanta, with the metals outlook still strong. The high dividend yield will eventually make the stock a compelling investment case.
The current stock price already factors in aluminium at USD170 per tonne and zinc at USD140 per tonne, lower than the current market prices, without factoring in upside from ongoing projects aimed to increase margins, the brokerage said in a note.
Also Read: Vedanta Ltd. (BSE) Plan to Split into Six Companies
Recent corporate activities, such as stake sales in Hindustan Zinc and Vedanta and dividends from Hindustan Zinc, are viewed as positives toward reducing Vedanta’s debt. Base metal stocks remain on CLSA’s preferred list ahead of those in the ferrous sector.
The board of Hindustan Zinc declared its second interim dividend at ₹19 per equity share for FY25, aggregating ₹8,028.11 crore. With 64.92 percent of Hindustan Zinc’s shares held by Vedanta, it is likely to receive ₹5,212 crore as dividend payout.
Also Read: Hindustan Zinc receives Rs 1,170 cr tax demand notice for 2020-21 from Income Tax department
Vedanta Ltd. had recently mobilised about ₹3,200 crore through an OFS in Hindustan Zinc Ltd. While the money raised through this OFS will be utilised for paring Vedanta’s debt and funding its growth projects, a ₹8,500 crore QIP is likely to help further pare its debt.
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People May Ask
What is CLSA’s target price for Vedanta shares?
CLSA’s target price on Vedanta shares is ₹ 520, indicating a 14 percent upside from the current price of ₹ 455.20.
How has Vedanta stock performed in the recent past?
Vedanta’s shares have risen 1.4 percent in the last month and 77 percent year-to-date.
Why is CLSA overweight on Vedanta despite the recent underperformance?
CLSA feels that Vedanta has yet to respond to the recent uptick in metal prices but believes that this situation is about to reverse. They further say that an encouraging scenario on the price of metals and attractive dividend yields form important drivers for making Vedanta an attractive investment.
What are some of the recent positive corporate actions by Vedanta are.
Recent stake sales in Hindustan Zinc and Vedanta, along with the dividends from Hindustan Zinc, will cheer investors since all these events will help remove a significant amount of debt from Vedanta’s books.
What is the significance of the recent dividend declared by Hindustan Zinc?
The Hindustan Zinc board approved a second interim dividend of ₹19 per equity share for FY25, aggregating ₹8,028.11 crore. With Vedanta’s 64.92% stake in Hindustan Zinc, the firm is likely to receive at least ₹5,212 crore as a dividend.
What will Vedanta do with the money mop-up from its recent financial exercises?
Vedanta is likely to use the ₹3,200 crore from the Hindustan Zinc OFS and another ₹8,500 crore from a QIP to reduce debt and fund its growth projects.
What is CLSA’s take on metal pricing in Vedanta’s stock?
According to CLSA, Vedanta’s stock price already indicts aluminium at $170 per tonne and zinc at $140 per tonne, which is below the current market prices without even considering the potential benefits from ongoing margin expansion projects.
How does CLSA rate base metal stocks compare to ferrous stocks?
CLSA has maintained a buying preference for base metals over ferrous ones in its recommendations, so it is positive on Vedanta due to its involvement in base metals.
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