Vedanta Q1 Results Review - Backward Integration, Cost Efficiency Drive Margins: Systematix

Systematix Research Report

Vedanta Ltd.’s Q1 FY25 consolidated Ebitda at Rs 99.5 billion (+54.9% YoY, 13.4% QoQ) was 3% above our estimate. Vedanta reported consolidated revenue of Rs 357.6 billion (+6.0% YoY and +0.7% QoQ), in line with our estimate. Ebitda margin for the quarter was reported at 27.81%, an expansion of 877 basis points/311 bps YoY/QoQ.

Aluminium, zinc, power, and steel segments were the key profitability drivers during the quarter. The aluminum segment reported Ebitda of Rs 44.4 billion (+144%/+48% YoY/QoQ), clocking growth on account of higher volumes, favorable commodity price, and captive consumption of alumina which drove down the cost of production.

Aluminium realisations for the quarter came in at $2,718/tonne, increasing by 11%/15% YoY/QoQ, in line with LME price movement. Hindustan Zinc and Zinc International reported Ebitda of Rs 39.4 billion (+18%/+8% YoY/QoQ) and Rs 1.8 billion (-34%/+214% YoY/QoQ), respectively.

Zinc International reported 37kt volumes, sequentially higher by 12% but fell 46% YoY. The steel segment reported an Ebitda of Rs 2.3 billion, 14 times YoY, compared to an Ebitda loss of Rs 160 million in Q1 FY24. Iron ore division Ebitda came in at Rs 1.8 billion (+12%/-67% YoY/QoQ).

Cairn Ebitda contracted 6%/29% YoY/QoQ to Rs 10.8 billion due to higher opex and lower working interest, offsetting the benefit of higher Brent during the quarter.

Net debt stands at Rs 613 billion as of Q1 FY25, an increase of Rs 50 billion QoQ maintaining leverage (net debt to Ebitda) sequentially flat at 1.5 times versus 1.9 times at the end of Q1 FY24.

Vedanta generated strong free cash flows (pre-capex) to the tune of Rs 43.7 billion, a growth of 41% YoY. The company has declared FY25 interim dividend aggregating to Rs 15/share, implying a dividend yield of 3.6% on current market price.

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