Shares of Vedanta ended 0.63 percent higher at ₹321.85 on BSE, snapping their two-day losing run on January 30 after the metals and mining giant reported a 42.25 percent year-on-year (YoY) drop in its consolidated net profit for the December quarter of the financial year 2022-2023 (Q3FY23) post-market hours in the previous session on January 27.
Vedanta reported a 42 percent YoY decline in consolidated net profit to ₹3,092 crore for Q3FY23 against a net profit of ₹5,354 crore in the year-ago period.
However, on a quarter-on-quarter (QoQ) basis, net profit grew 15 percent to ₹3,092 crore from ₹2,690 crore.
The consolidated revenue of the firm stood largely flat at ₹33,691 crore in the December quarter this year against ₹33,697 crore in the same quarter last year.
On a QoQ basis, the company's revenue fell 7 percent; the company's revenue was ₹36,237 crore in Q2FY23.
The board of directors of the company approved the fourth interim dividend of ₹12.50 per equity share on the ace value of ₹1 per share for FY23. The record date for the dividend payment is February 4, 2023.
Brokerages retain their views
Brokerage firms found Vedanta's numbers broadly in line. Hence, most of them retained their views on the stock.
Brokerage firm Kotak Institutional Equities has maintained a 'sell' call on Vedanta stock due to its rich valuation but slightly increased the target price to ₹240 from ₹220.
The brokerage said Vedanta's Q3 numbers were in line with its estimates as strong earnings in its oil division offset weakness in other divisions.
Kotak believes that the capacity expansion and backward integration at the aluminium division would be a growth driver for Vedanta in FY24-25E. The brokerage firm expects aluminium EBITDA (including Balco) to more than double to ₹13,000 crore in FY2025E from ₹5700 crore in FY23E.
Kotak said that high parent debt is a key overhang and deleveraging at the parent level through dividends is encouraging.
"We have cut our EBITDA estimates for FY2023E by 4 percent, factoring 9MFY23 (9-month financial year 2023) performance and increased estimates for FY24-25E, considering the aluminium and oil division’s higher earnings," said Kotak.
Brokerage firm Motilal Oswal Financial Services maintained a 'neutral' view on the stock with a target price of ₹330.
"We reiterate our 'neutral' rating on Vedanta as we believe the current environment is fully priced in. We lower our SoTP-based target price to ₹330. While we marginally reduce our aluminium volume assumptions, savings from captive and linkage coal should help offset the downtrend," said Motilal Oswal.
Motilal believes the global macro environment is likely to weigh on any significant improvement in LME prices. The brokerage firm pointed out that the China opening may support demand and prices, but the fears of a recession in Europe remain a concern.
Motilal Oswal has reduced its metal volume assumptions, leading to a 26 percent and 23 percent reduction in FY23E and FY24E APAT respectively. The brokerage added that the reduction in metal volume will be partly offset by the reduction in input costs, namely thermal coal.
Brokerage firm Phillip Capital has also maintained a 'neutral' call on the stock with a target price of ₹310
Phillip Capital underscored that Vedanta is most exposed to any change in commodity prices, the outlook of which is improving on expected softer landing in Europe/US and reopening in China.
The brokerage firm highlighted that the potential sale of Zinc International will ensure that the dividend story may continue. However, this will drain the entire cash and will also inflate the debt in the listed entity sharply, impacting the dividend-paying ability of the firm in the medium and long run.
"We feel that the dividend yield story is at the fag end," said Phillip Capital.
Disclaimer: The views and recommendations given in this article are those of the broking firms. These do not represent the views of MintGenie.