Vedanta stock rallies 15% in one week as market cap climbs to Rs 2 trn

In one week, the stock of the diversified metal conglomerate has surged 15 per cent, as compared to the 1.3 per cent rise in the BSE Sensex. It surpassed its previous high of Rs 506.85 that it touched on May 22, 2024.

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A sharp rally in the stock price of Vedanta has seen the Vedanta Group company’s market capitalisation surpass the Rs 2-trillion mark on Friday.

At 10:08 AM, with a market cap of Rs 2 trillion, Vedanta was trading 2 per cent higher at Rs 512.20. In comparison, the BSE Sensex was up 0.14 per cent at 85,959.

Beyond that, the company has set targets that reflect its pursuit of sustainable growth and further improving the company’s balance sheet integrity. The management said it seeks to further deleverage Vedanta Resources by $3 billion over the next three years.

“Our team is energised and the fundamentals supporting the sectors in which we operate remain robust, providing an optimistic outlook. We believe that the key growth projects that are on the horizon, along with the expected acceleration in commodity prices, will drive future profitability,” Vedanta said.

The mining company is witnessing various positive developments, capacity expansion, cost reduction, Improving liquidity and overall financial muscle with net debt/EBITDA dropping to 1.2x.

Analysts at Centrum Broking believe the company is set to reap earnings and margins growth over the next two to three years and it can achieve $10 billion in Ebitda over the next five years.

“We maintain our FY25/FY26 DPS estimate of Rs 45 per share (around 11 per cent dividend yield), as Vedanta intends to reduce leverage of the parent company, Vedanta Resources (VRL),” the brokerage firm said.

In the April to June quarter (Q1FY25), Vedanta reported a healthy OPBITDA (operating profit before interest, tax, depreciation, and amortisation) of around Rs 10,275 crore vis-à-vis around Rs 6,975 crore in Q1FY2024.

The company is expected to report an OPBITDA in the range of around Rs 48,000 crore to Rs 49,000 crore (including brand fees) in FY25, on expectation of healthy realisation in the near term and Vedanta’s sustained cost reduction initiatives across segments. 

Further, the full ramp-up of the enhanced alumina refineries capacities and the expected commencement of the captive coal and bauxite blocks in the near term would impart cost efficiency and is likely to partially hedge the profits in the medium-term against the volatility in commodity prices.

Once operationalised, Vedanta would be better placed to withstand the shocks during the cyclical downturns.

The share of value-added products is also likely to increase, supporting the operating margins, saidratings agency ICRA.