CLSA raises target price on Vedanta on improving growth visibility

Mumbai: CLSA has raised target price on Vedanta by 13.3% to Rs 340 and maintained a 'buy' rating citing improving growth visibility.

CLSA said Vedanta is on track to fully ramp-up its aluminium and power capacities over FY18-19 and beyond FY19, the company has readied growth plans across divisions but many of these are contingent on regulatory approvals coming through.

"If all these projects materialise, consolidated Ebitda ( earnings before interest, taxes, depreciation and amortisation) could get a 25-30% boost from the FY19 level," said CLSA in a report released today.

CLSA said the stock has risen significantly but valuations are still attractive with potential catalysts like Cairn merger completion and dividend hike around the corner.

"The two catalysts are: 1) completion of Cairn India merger after approvals (RBI, High Court, Ministry of Petroleum); and 2) hike in dividend payout at 4Q results so that Vedanta Plc can service its debt," said CLSA, forecasting a earnings per share compounded annual growth rate of 25% for FY17-19 period.

The stock has surged 178.2% in the last one year. It is trading at 18.76 times on a trailing basis. On Tuesday, the stock ended down 0.7% at Rs 261.65 on the BSE.