Vedanta Shares Rise After Q1 Profit Beats Estimates But Analysts Lower Target Price

Shares of Vedanta Ltd. extended gains to the second consecutive session after the company's first-quarter net profit rose, beating analysts' estimates. This was on the back of lower input commodity prices and a tax write back of Rs 735 crore.

Net profit of the company rose 54.02% year-on-year to Rs 5,095 crore in the April-June quarter. This compares with a Rs 2,353-crore net profit estimate by analysts tracked by Bloomberg.

• Revenue rose 6.02% to Rs 35,764 crore (Bloomberg estimate: Rs 36,092 crore).

• Ebitda rose 55.68% to Rs 9,995 crore (Bloomberg estimate: Rs 9,627 crore).

• Ebitda margin at 27.94% versus 19.03% (Bloomberg estimate: 26.7%).

• Net profit rose 54.02% to Rs 5,095 crore (Bloomberg estimate: Rs 2,353 crore)

Nuvama Research has cut its target price on the stock to Rs 608 per share from Rs 644 apiece earlier, implying a 45.7% upside. This is the highest among the brokerages tracked by Bloomberg.

It has cut current and the next fiscal's Ebitda estimates by around 8% and 3%, respectively, to factor in lower commodity prices on delay in demand recovery. "The recent money raising via Rs 85 billion QIP shall take care of upcoming debt repayment, and it can afford lower commodity prices without leveraging," it said.

Motilal Oswal Financial Services Ltd. has also lowered its target price for the stock from Rs 520 apiece earlier to Rs 460 per share, implying an upside of Rs 1.5%.

The company's performance in the June quarter came largely in line across segments, the brokerage said. "The capex plans are progressing well, which would lead to further cost savings," it said.

Management targets to clock $10 billion of Ebitda, led by the upcoming capacity, which will produce higher value added product, Motilal Oswal noted.

Further, the brokerage is positive on the fact that the company remains firm on its deleveraging plans. Higher cash flow going forward will support its expansion plan along with deleverage, it said.

Shares of Vedanta jumped as much as 2.92%, its highest level since Aug. 5, before paring gains to trade 1.94% higher at Rs 422 apiece, as of 9:53 a.m. This compares to a 0.96% advance in the NSE Nifty 50.

The stock has risen 63.24% year-to-date and 81.5% in the last 12 months. Total traded volume so far in the day stood at 0.16 times its 30-day average. The relative strength index was at 40.33.

Out of 13 analysts tracking the company, eight maintain a 'buy' rating, four recommend a 'hold' and one suggests 'sell', according to Bloomberg data. The average 12-month analysts' consensus price target implies an upside of 13.7%.