Vedanta Limited | Latest market updates

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Rising Commodity Prices has placed Vedanta in a Favourable Position

Mining Conglomerate Vedanta Ltd. benefits from rising commodity prices and is placed in a favourable position in the market with this surge.

Vedanta Ltd. is an Indian Multinational Company headquartered in Mumbai, having its main operations in iron ore, gold and aluminium mines across Goa, Karnataka, Rajasthan and Odisha. The stock of Vedanta Ltd. has been in focus now as the company would benefit from the rising prices of commodities.

How Will Rise in Commodities Benefit Vedanta?

Rising commodity prices will benefit the mining conglomerate by increasing revenue and profitability. When prices for commodities like Silver, Copper or Iron Ore rise, companies like Vedanta can sell their products at higher prices and this will lead to an increase in revenue for them, which will thus increase the profits and margins.

As there has been a rise in prices of commodities, The Mining Conglomerate Vedanta Ltd. is looking itself in a favourable position, The company has performed well recently reporting an EBITDA of Rs.87600 crores in Q4 FY 2023-24, This was driven by lower cost of production in aluminium and zinc. Furthermore, The volumes for its aluminium business are set to improve ahead and the start of coal mines in FY 2025-26 will also lower its cost of production.

Street View on Vedanta Ltd.

Post its earnings note, analysts have said they believe that Vedanta is best placed to ride rising commodity prices as this rise will further improve cash flows. They also stated that commodity prices have legroom to improve from here driven by factors like China Stimulus and improved demand, This rise will give further support to the cash flows of the company and one can factor in 6% higher aluminium and 9% higher zinc prices, which raises the FY 25/26 EBITDA by 11% and 15% respectively.

Conclusion: The rising commodity prices would be a great benefit for Vedanta on both top-line and bottom-line frontiers. The company is also on the path to deleverage and demerger, The deleveraging and demerging plans look promising for the Company and the streets also reacted positively to the demerging plans last year. The stock is up by more than 75% from there and currently trades at Rs.408 a piece as of April 29, and with this rising commodity prices the earnings for the next quarter are expected to be strong on both top line as well as bottom line basis.

Disclaimer: This post has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.

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Vedanta eyes USD 10 billion EBITDA on strength of growth projects and demerger plans

Explore Vedanta’s strategic roadmap to achieve USD 10 billion EBITDA through high-impact growth projects, highlighting the potential long-term benefits for the company’s stock performance.

Vedanta’s Strategic Roadmap to USD 10 Billion EBITDA

Vedanta, a prominent mining conglomerate, has laid out an ambitious plan to achieve a near-term EBITDA of USD 10 billion. This strategy is underpinned by the timely execution of over 50 high-impact growth projects spanning various sectors, including zinc, aluminium, oil and gas, and power. These projects are at an advanced stage of completion, demonstrating Vedanta’s commitment to enhancing its operational efficiency and market presence.

Aluminium Business Expansion

Vedanta’s aluminium business is a key pillar of its growth strategy. The company has several projects underway to achieve an integrated supply of 3.1 million tonnes per annum. Currently, the business operates at multi-year low production costs of USD 1,711 per tonne, positioning it in the first quartile of the global cost curve. With a 100% vertically integrated supply chain, Vedanta’s aluminium business is well-poised to capitalise on the strong demand outlook in India, where the domestic market is expected to double every five years.

Zinc Business Growth

Vedanta’s zinc business is another critical component of its growth strategy. The company produces 1.2 million tonnes of zinc metal annually at a cost of USD 1,000 per tonne. Additionally, its silver volumes are at 800 million tonnes per year. With a 75% market share in India’s primary zinc market, Vedanta is developing plans to increase its production capacity to 2 million tonnes. This expansion is expected to reinforce Vedanta’s dominant position in the zinc market and contribute significantly to its EBITDA goals.

Oil and Gas Expansion

Vedanta’s oil and gas business is focusing on expanding its resource base to 2 billion barrels of oil equivalent over the next three years. The company aims to double its production to 300,000 barrels of oil equivalent per day. This ambitious target underscores Vedanta’s efforts to enhance its oil and gas output, aligning with its broader strategy to diversify and strengthen its energy portfolio.

Power Generation Capacity Increase

Vedanta is also investing in major projects to expand its power generation capacity. The company plans to increase its capacity from 2.9 GW to 5 GW, supporting its energy needs and ensuring a stable supply for its industrial operations. These projects include capacity expansions at the Lanjigarh alumina refinery from 3.5 to 5 million tonnes and the BALCO smelter from 0.6 to 1 million tonnes.

Investment and Financial Projections

Vedanta is investing around USD 8 billion in its ongoing growth projects. This significant investment is expected to generate substantial returns, with the company potentially achieving USD 5 billion in free cash flows. The projected USD 10 billion EBITDA includes USD 4.2 billion from aluminium, USD 2.7 billion from Zinc India (zinc and silver), and USD 0.9 billion from oil and gas.

Long-Term Stock Performance and Market Positioning

Vedanta’s comprehensive growth strategy positions the company well to capitalise on India’s economic growth. With the country’s GDP expected to reach USD 7 trillion by 2030, Vedanta’s focus on expanding its core businesses and investing in high-impact projects aligns with broader economic trends. Additionally, Vedanta’s proposal to vertically split its businesses and list five additional entities on the stock exchanges by the end of the year further underscores its commitment to creating value for shareholders.

Potential Benefits for Stockholders

Vedanta’s growth projects, operational efficiency improvements, and the planned demerger are positive signs for its stock in the long term. These factors could lead to increased profitability, improved cash flow generation, and potentially a higher stock valuation. Investors should monitor the company’s progress on these initiatives and their impact on the overall financial performance.