Global brokerages maintain rating on Vedanta post Q4; CLSA cuts target price

Global brokerage firms maintained their rating on Vedanta on Wednesday after the metals & mining firm’s March quarter consolidated profit fell a 43.3 percent year-on-year (YoY) to Rs 3,218 crore. Profit in the year-ago period stood at Rs 5,675 crore.

Profit attributable to owners declined 45.5 percent to Rs 2,615 crore compared to the same period last year, the company said in its filing.

Revenue from operations fell 15.1 percent YoY to Rs 23,468 crore in the quarter ended March 2019.

CLSA slashed its target price to Rs 135 from Rs 170 earlier.

“There are concerns over related party transaction which is likely to remain an overhang. EBITDA improved on a QoQ basis for aluminium & overseas zinc business,” said the CLSA report. However, slow volume ramp-up in zinc & oil is a concern.

Edelweiss also maintained its hold rating on Vedanta post March quarter results and slashed its target price to Rs 175 from Rs 200 earlier.

"Vedanta’s Q4FY19 EBITDA was down 22 percent on a YoY basis but it met consensus owing to cost efficiencies at Zinc (Zn) International and aluminium (Al) divisions. Going ahead, despite sustained cost efficiencies at key divisions, we see lower Zn prices keeping earnings growth in check and stock performance muted," said the report.

Here’s what other global brokerage firms recommended on Vedanta post Q4 results:

Morgan Stanley: Equal Weight| Target Rs 176

Morgan Stanley maintained its Equal Weight rating on Vedanta post Q4 results with a target price of Rs 176.

The core EBITDA was in-line with estimates, but the focus remains on volume growth in zinc, aluminium, and oil & gas. The focus will also be on better cost management in the near term, said the note.

Citigroup: Neutral| Target Rs 195

Citigroup maintained its Neutral rating on Vedanta post Q4 results with a target price of Rs 195. The Q4 EBITDA was in-line with estimates. There are still some concerns on parent leverage.

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Vedanta to announce Q4 results today; here are key factors to watch out for

Metals & Mining major Vedanta, which will announce its March quarter results on May 7, is expected to report a poor set of numbers.

The key thing to watch out for would be the management's commentary on the progress on Gamsberg mine and outlook for base metal prices.

Research firm ICICIdirect expects Vedanta to report net profit of Rs 1,106.4 crore down 77 percent year-on-year (down 29.7 percent quarter-on-quarter). Net Sales are expected to decrease by 16.9 percent Y-o-Y (down 3 percent Q-o-Q) to Rs 22,961.1 crore.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to fall 30.1 percent YoY (down 3 percent QoQ) to Rs 5,477.2 crore, the report said.

Narnolia Financial Advisors expects Vedanta's revenue (ex-copper) to grow 7 percent YoY and 3 percent QoQ to Rs 21,468 crore. YoY growth is primarily led by 22 percent YoY growth in zinc international revenue and Rs 1,400 crore revenue from other segment (steel) against Rs 196 crore in 4QFY18.

Aluminium revenue is expected to grow 5 percent YoY to Rs 7484 crore led by 8 percent YoY growth in volume to 527 kt. Oil and Gas revenue is expected to come in at Rs 2,836 crore (up 3 percent YoY, down 15 percent QoQ), led by 2 percent growth in gross production at 194000 boepd, the research firm said.'

The broking firm further added that EBITDA for the quarter is expected at Rs 6,117 crore (down 22 percent YoY, up 8 percent QoQ), led by significantly lower YoY aluminium EBTIDA at Rs 329 crore (down 75 percent YoY, up 25 percent QoQ) due to lower LME aluminium, higher alumina and power cost. Further more negative EBITDA of Rs 60 crore in copper against Rs 409 crore in 4QFY19 is also expected to impact overall EBITDA.

Vedanta’s Goa iron ore operation continues to be impacted by suspension of mining in Goa, it added.

Research and broking firm Motilal Oswal expects Vedanta’s EBITDA to decrease 2 percent QoQ (-29 percent YoY) to Rs 5,550 crore due to lower zinc volumes and the exchange rate impact. Adjusted PAT is estimated to decrease 51 percent QoQ to Rs 770 crore. EBITDA for aluminium is expected to come in at Rs 90 crore, on lower LME.

Emkay Global Financial Services expects sequential growth of 2 percent in topline driven by higher revenues from Gamsberg project and aluminum business in the wake of better availability of coal and bauxite. The firm expects the power business also to be sequentially better which should result in EBITDA margin expansion on a QoQ basis.

Edelweiss Securities expects Vedanta to report a 35.2 percent YoY (down 22 per cent QoQ) drop in profit at Rs 1,819 crore with revenues falling 15.7 percent YoY (down 1.6 percent QoQ) to Rs 23,300 crore.

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Vedanta, JSW Steel in talks for a possible, last minute bid for Essar Steel

Even as all the hearings in Essar Steel insolvency case get over on February 19, there may still be a final twist in the seemingly unending auction race.

Sources told Moneycontrol that the Anil Agarwal-led Vedanta may make another attempt at buying Essar Steel. But this time, it won't be alone but may partner Sajjan Jindal's JSW Steel.

The two companies may come together and put in a joint bid of about Rs 47,000 crore, said an industry executive. "But a final call is yet to be taken," said the executive.

At present, ArcelorMittal's bid of Rs 42,000 crore has found backing from Essar Steel lenders. The Ruias, through their holding company Essar Steel Asia Holdings, had submitted a proposal of Rs 54,000 crore. But the lenders haven't taken it up, and the courts have also turned down Ruias request.

Vedanta, which had submitted an Expression of Interest for Essar at the starting of the auction, had earlier submitted a bid in the second round. But later, the second round was called off by the National Company Law Tribunal (NCLT).

JSW Steel has been vocal about its interest in Essar Steel. Earlier, it had teamed up with Numetal, the VTB Bank-led consortium, to submit a bid in the second round. The Jindal company can't put in a sole bid, despite giving such an offer to the lenders, as it hadn't submitted an expression of interest.

Despite the possibility of this last-gap development, it remains to be seen if the lenders, and then the courts, will entertain the bid that will further delay the insolvency process that has already crossed over 570 days.

Last week, the National Company Law Appellate Tribunal had directed the NCLT to complete hearing by February 19 and give orders. The Appellate Tribunal will take up the case on February 28, and possibly will pass a judgment.

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Source: Moneycontrol