Vedanta rating – Reduce: A buoyant quarter for the company

We enhance our Ebitda estimate by 28%/15% for FY2022/23e on greater commodity costs and FV to Rs 270 (from Rs 180). REDUCE.

VEDL’s Q4FY21 EBITDA recovered strongly (+99% y-o-y, +17% q-o-q) led by greater commodity costs and managed prices. Zinc and aluminum, which type ~70% of consolidated earnings, are each benefiting from sturdy costs and muted prices. A robust value setting and better dividend potential scale back issues of promoter debt. We enhance our Ebitda estimate by 28%/15% for FY2022/23e on greater commodity costs and FV to Rs 270 (from Rs 180). REDUCE.

Q4FY21—sturdy earnings led by greater commodity costs and better volumes
VEDL’s Q4FY21 consolidated Ebitda of Rs 90 bn (+99% y-o-y, +17% q-o-q) got here according to our estimates led by sharp sequential quantity development, value restoration and muted prices throughout divisions. Consolidated web debt at Rs 244 bn elevated 14% y-o-y (-31% q-o-q). Standalone debt (consolidated ex HZL, Balco) declined by 4% y-o-y to Rs 374 bn (-14% q-o-q).

Key divisional efficiency in Q4FY21: (i) The aluminum division reported an Ebitda of $692/ton (versus $565/ton in Q3FY21) led by greater aluminum costs, partially offset by greater prices; (ii) the oil & fuel division noticed 3% y-o-y quantity enhance whereas Ebitda elevated by 23% y-o-y led by greater crude oil costs; and (iii) Zinc Worldwide reported an Ebitda of Rs 2 bn from a lack of $610 mn in Q4FY20 led by greater zinc costs and decrease prices. Ebitda from the iron ore enterprise elevated to Rs 8 bn (+127 y-o-y, +39% q-o-q) on file excessive iron ore costs.

All three key companies to ship earnings development over FY2022-23E
VEDL has publicity to seven commodities however earnings from zinc, aluminum and oil type ~80% of its attributable Ebitda. We count on Ebitda from these three companies to extend from Rs 174 bn in FY2021 to Rs 237 bn in FY2023e (+36%) and the remaining companies to stay stagnant over FY2021-23e. (i) The aluminum division will profit from greater costs led by demand development and Chinese language provide restrictions. Additional, VEDL would enhance its smelting capability to 2.3 mtpa from 2 mtpa and alumina refinery to five mpta from 2 mtpa over FY2022-23e. (ii) Zinc—steady costs and 28% metallic quantity development over FY2021-23e led by quantity ramp-up in India and Zambia. (iii) Oil and fuel—greater costs with restoration in demand and 20% quantity development over FY2021-23e as the expansion initiatives at Cairn begin to ship.

Properly-placed amid commodity value buoyancy, improve earnings
The promoters have enhance their stake in VEDL to scale back dividend leakage—(i) by 4.98% by way of a creeping acquisition in December 2020 and (ii) by 10.01% by way of a voluntary open provide in January 2020, taking total holding to 65.18%. Additional makes an attempt to extend stake can’t be dominated out. We’ve raised Ebitda by +28%/+15% for FY2022e/23e totally on greater commodity costs. Keep Cut back.