Neutral on Vedanta, target price Rs 459: Motilal Oswal Securities

Motilal Oswal Securities has neutral call on Vedanta with a target price of Rs 459.

Vedanta, incorporated in the year 1965, is a Large Cap company (having a market cap of Rs 1,50,081.91 crore) operating in Diversified sector.

Investment Rationale
VEDL announced a capex policy with a focus on growth capex anddividend, while avoiding the ICD route to support its parent.

The stock trades at 4.9x/5.4x FY23E/FY24E EV/EBITDA.

At current prices, we do not expect a favourable risk-reward scenario in the stock. Oil, Steel, Aluminum, Zinc - all major commodities which VED produces are above the cycle averages and are supported by the Russia-Ukraine conflict. The related tightness may ease if the two nations agree to a settlement.

The brokerage raised FY22E/FY23E EPS by 2%/3% on the back of a $10/bbl increase in the forecast for crude oil for both years, resulting in a 3% increase in TP to Rs 459 (from Rs 450 earlier).

Motilal Oswal's TP of Rs 459 now comprises a) Rs 195 for the Zinc business, with a 20% holding company discount, and b) Rs 265 for other businesses, of which the biggest share is that of the Aluminum business and maintains Neutral rating.

Financials
For the quarter ended 31-12-2021, the company has reported a Consolidated Total Income of Rs 34,674 crore, up 11.59% from last quarter's Total Income of Rs 31,074 crore and up 46.79% from last year's same quarter Total Income of Rs 23,621 crore. The company has reported a net profit after tax of Rs 5,354 crore in the latest quarter.

Promoter/FII Holdings
Promoters held 69.69 per cent stake in the company as of 31-Dec-2021, while FIIs owned 17.69 per cent, DIIs 1.81 per cent.