1 week Ago
Shares of Anil Agarwal-owned mining conglomerate Vedanta Ltd., have been upgraded by brokerage firm Investec after the recent correction seen in the stock price, in-line with the fall in other metal stocks. Investec has upgraded Vedanta to "buy" from its earlier rating of "hold".
However, the brokerage has left its price target unchanged at ₹510, which still implies a potential upside of 35% from Vedanta's closing price on Tuesday. Vedanta shares have corrected 17% in the last one month and this, according to Investec, presents an attractive opportunity, given the average free cash flow and dividend yield of 12% and 7% respectively over financial year 2026 and 2027 respectively. These attractive yields drove Investec's upgrade.
Additionally, the stock's current market price reflects a 12% discount of Aluminium, Zinc and Silver to spot LME, which accounts for the potential risk with regards to demand-price elasticity, Investec wrote in its note. Investec also believes that Vedanta has a strong competitive edge on costs, even before considering potential savings from raw material expenses due to the positioning of its Aluminium and Zinc smelters. However, the brokerage also said that the risks related to unrelated capital allocation or restructuring will have to be watched out for.
Vedanta recently delayed the timeline for the completion of its demerger to September from March. It is currently undergoing a process to demerge into five independent, listed entities and shareholders of the current listed entity will get one share each for every one share they hold. Out of the 15 analysts that now have coverage on Vedanta, 10 of them have a "buy" rating on the stock, four of them say "hold", while one has a "sell" rating.
Shares of Vedanta ended 0.6% higher on Tuesday at ₹376. The stock is down nearly 30% from its 52-week high of ₹527.
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