Vedanta Ltd Stock Analysis: 1-Year Target ₹704, Upside 45%

Vedanta Ltd Fundamental Analysis — 1-Year Target ₹704 (Upside 45%)

Current Price: ₹493 | Target Price: ₹704 | Upside Potential: 45% | Time Horizon: 12 Months

Overview

Vedanta Ltd, part of the Vedanta Group, is India’s leading diversified natural resources conglomerate with businesses spanning aluminium, zinc, oil & gas, copper, iron ore, silver, and power. Its wide exposure to commodities and integrated operations make it a proxy for India’s industrial and resource growth story.

The stock has shown steady improvement following strong FY25 and Q2 FY26 results, supported by higher commodity prices and margin expansion. With strong operational cash flow, continued deleveraging, and potential value unlocking through subsidiary IPOs, Vedanta is well-positioned for robust medium-term growth.

Investment Thesis

1. Rising Commodity Cycle and Earnings Momentum

Vedanta’s financial performance has improved meaningfully in FY25 and Q2 FY26 due to firm global metal prices — especially in aluminium and copper — alongside improved operational efficiencies. The company has leveraged its cost optimization strategy to expand margins even in a volatile pricing environment.

2. Record Revenue and Operating Profits

Vedanta reported record consolidated revenue and EBITDA in FY25. EBITDA margins expanded due to higher realizations and cost control. Aluminium and zinc segments were key contributors to overall profitability.

3. Focus on Deleveraging and Asset Monetisation

The management has prioritized debt reduction through asset monetisation, cash flow generation, and potential listing of subsidiaries. This deleveraging plan has already improved the company’s net-debt-to-EBITDA ratio and boosted investor confidence.

4. Cash Flow Strength from Core Assets

Subsidiaries such as Hindustan Zinc (HZL) and the aluminium business continue to generate strong free cash flow, ensuring liquidity and supporting dividends. HZL, in particular, benefits from rising silver production and stable zinc demand.

5. Attractive Valuation and Re-rating Potential

At ₹493, Vedanta trades below its intrinsic valuation. If earnings momentum sustains and the market re-rates its EV/EBITDA multiple, the stock could reasonably achieve ₹704 in 12 months — implying a 45% upside.

Financial Performance Snapshot

Metric	FY24	FY25	Change YoY
Revenue (₹ Cr)	~1,45,000	~1,52,000	+5%
EBITDA (₹ Cr)	~35,500	~39,000	+10%
EBITDA Margin	21.5%	23%	+150 bps
PAT (₹ Cr)	~15,000	~18,000	+20%
Net Debt/EBITDA	1.9x	1.6x	Improved

(Values rounded; for indicative analysis based on FY25 results.)

Profit & Loss Analysis

• Revenue Growth:
  Vedanta achieved healthy revenue growth in FY25 on account of firm commodity prices and higher output from the aluminium and zinc segments.
  
• Operating Margin Expansion:
  The company’s operating margins improved to around 22–23%, driven by efficiency in power and input costs, and higher zinc and aluminium prices.
  
• Profit After Tax:
  PAT rose significantly due to stronger EBITDA and controlled finance costs. Excluding exceptional items, adjusted profit growth exceeded 20% YoY.
  
• Exceptional Items:
  While there were one-time charges related to settlements and provisions, these are not expected to materially impact long-term profitability.

Segment-Wise Performance

Aluminium

Vedanta is India’s largest aluminium producer. With strong domestic demand, operational efficiency, and improved LME prices, this segment continues to be the biggest revenue contributor.

Zinc, Lead, and Silver (Hindustan Zinc)

HZL remains Vedanta’s strongest profit generator. Silver production has boosted margins, while zinc volumes have remained stable. Strong cash generation from HZL supports Vedanta’s overall liquidity.

Oil & Gas

Vedanta’s oil and gas business has maintained stable output levels. Although prices fluctuate, this vertical provides diversification from metals and supports earnings resilience.

Copper & Power

Copper operations benefitted from better realizations, while the power business contributed steady cash flows due to increased internal consumption.

Balance Sheet Strength

Vedanta’s continued focus on debt reduction through cash flow optimization has significantly strengthened its balance sheet. The company’s net debt position has improved, supported by better cash generation and disciplined capex management. Future monetisation plans — including potential listings of subsidiaries — are likely to further reduce leverage and enhance shareholder value.

Valuation and Target Derivation

Assumptions:

• FY26E EPS: ₹60
• P/E Multiple: 11x (industry average 10–12x)
• Implied Target Price: ₹704

Scenario	EPS (₹)	P/E (x)	Implied Price (₹)	Upside
Conservative	55	9	495	0%
Base Case	60	11	660	34%
Bull Case	64	11	704	45%

Conclusion:
Under the base-to-bull case, Vedanta can reach ₹704 if commodity prices remain firm, EBITDA grows 10–15%, and the company continues its deleveraging journey.

Growth Outlook

• Earnings Visibility:
  Sustained across aluminium and zinc, supported by global industrial demand and domestic infrastructure growth.
• Operational Efficiency:
  Focused on cost optimization, energy efficiency, and higher production utilization.
• Strategic Value Unlocking:
  IPOs or stake sales in subsidiaries could add shareholder value and improve the balance sheet.
• Commodity Price Support:
  Global trends in aluminium, copper, and zinc remain favorable in the medium term.

Risks to Watch

• Commodity Price Volatility: Sharp corrections in global metal prices could impact margins.
• Regulatory Uncertainty: Delays in approvals or environmental regulations may affect operations.
• Capital Intensity: Metals businesses require heavy investment, which could tighten free cash flow during downturns.
• Execution Risks: Slow progress in asset monetisation could delay debt reduction plans.

Final Verdict

Vedanta Ltd is emerging stronger from its recent consolidation phase, backed by robust fundamentals, improved margins, and a disciplined focus on debt reduction. With supportive commodity prices, strong subsidiary performance, and an active capital unlocking strategy, the company stands to benefit from both cyclical and structural growth drivers.

A 12-month price target of ₹704 — representing a 45% upside from ₹493 — appears achievable if global commodity markets remain steady and Vedanta continues its operational and financial improvements. The stock offers an attractive risk-reward profile for medium-term investors seeking exposure to India’s metal and energy sectors.

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