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Brokerage Maintains Neutral View on Vedanta
Motilal Oswal increased its profit forecasts for Vedanta for fiscal years 2027 and 2028 by 20%. This comes after Vedanta's Q4 FY26 performance met expectations, driven by strong volumes and favorable prices on the London Metal Exchange (LME). Despite raising the target price to ₹800, the brokerage maintained its 'Neutral' rating, suggesting a balanced view of the stock's potential.
Driving Growth and Cutting Debt
Vedanta's management aims for significant earnings growth, supported by planned capacity expansions that will enable the production of higher value-added products. The company expects a favorable pricing environment to boost profitability, with ongoing capital expenditure projects designed to improve operational cost savings.
Simultaneously, Vedanta is focused on reducing its debt. Motilal Oswal anticipates that stronger cash flows in the coming periods will sufficiently fund both expansion plans and debt repayment, strengthening the company's financial position.
Financial Outlook and Valuation Metrics
Motilal Oswal's revenue and EBITDA forecasts for FY27 and FY28 remain largely unchanged. The brokerage's valuation is based on a multiple of 6.6 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) for fiscal year 2028 estimates.
Demerger Plan and Value Assessment
Vedanta plans to demerge into five separate listed companies by May 1, 2026. These will include businesses focused on Aluminum, Oil & Gas, Power, Iron & Steel, and a remaining Vedanta Ltd. holding the Hindustan Zinc Ltd. business. Motilal Oswal's valuation approach, summing the estimated fair value of each segment, results in a total target price of around ₹800 per share. The Aluminum and Zinc divisions are expected to be the primary value drivers.