Vedanta Q3 Result Preview: Higher prices may drive EBITDA; all eyes on debt reduction roadmap

Mining major Vedanta is expected to report moderate growth in revenue for the quarter ended December due to muted volumes in aluminium, steel and iron ore segments. However, operating profit is likely to be stronger led by higher commodity prices.

The company is expected to report consolidated revenue of Rs 33,676-35,477 crore, according to estimates given by three brokerage firms. This is compared to a revenue of Rs 34,102 crore a year ago and Rs 34,184 crore a quarter ago.

Operating profit is seen in the range of Rs 6,667 crore to Rs 7,988 crore, compared to Rs 6,734 crore a year ago and Rs 6,718 crore a quarter ago.


The company’s consolidated net profit is seen between Rs 974 crore and Rs 1,589 crore, against a profit of Rs 1,229 crore a year ago, and a loss of Rs 1,226 crore a quarter ago.

The mining major is scheduled to release its earnings on Thursday.

More than the earnings performance, Dalal Street would want the company to give a roadmap on debt reduction as that remains the primary concern.

On Wednesday, India Ratings downgraded the rating on the debt facilities of the company to “A+” from “AA-”, expecting an impairment in the company’s financial flexibility on borrowing constraints.

Here’s a summary of who is expecting what from Vedanta and the company’s management:

Kotak Institutional Equities

We forecast a 19% YoY increase in EBITDA (19% QoQ) due to stronger commodity prices across segments, particularly in zinc and aluminium.

The aluminium EBITDA is expected to increase sequentially by 25% and 155% YoY, primarily led by improved realisations.

The oil and gas division may witness flat EBITDA QoQ, while the Zinc India division may see an 11% QoQ increase in EBITDA due to higher zinc prices and improved volumes.

Motilal Oswal Securities

The management’s guidance on future dividend payout is critical. Further, an update on parent Vedanta Resources’ debt situation is also crucial. Any guidance on the demerger timeline of different verticals will also be eyed, besides outlook on volumes and CoP across verticals.

PhillipCapital

Aluminium, steel, iron ore and zinc international segments may report a decline in volumes sequentially, but copper volumes may rise.

LME Aluminium and Zinc have increased 2% and 3%, respectively, on a sequential basis, whereas LME Lead was down 1%. Meanwhile, crude oil prices have corrected 3% sequentially.

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