MOSL: VEDANTA (Neutral)-Strong operating performance on HZL and aluminum
​Vedanta: Strong operating performance on HZL and aluminum; Maintain Neutral
(VEDL IN, Mkt Cap USD14.0b, CMP INR241, TP INR225, 7% Downside, Neutral)
- Vedanta (VEDL) reported a strong 4Q, on expected lines, as EBITDA grew 23% QoQ to INR73.5b. The performance was driven by feast phase of mining at Hindustan Zinc (HZL; best-ever volumes and decade-high realization) and higher prices/volumes in aluminum. Ex-HZL EBITDA grew 12% QoQ. The results included Cairn India as merged entity. Adj. PAT declined 18% QoQ to INR15.2b on dividend distribution tax at subsidiaries. Net debt (incl. buyers' credit and dividend of INR72b paid in April) rose INR38b QoQ to INR266b. Key highlights:
- Aluminum: Lower power cost on operating/sourcing efficiencies and higher volumes (de-stocking) drove EBITDA surprise. EBITDA/t rose USD96 QoQ to USD398. FY18 volumes guidance is 1.5-1.6mt (est. of 1.45mt), up ~40% YoY. Duty hike on captive power will impact only the 500kt Jharsuguda operations.
- Cairn India: Rajasthan volumes would increase from ~157kboped in 4Q to ~165kboped in FY18 on infill drilling at Mangala and higher gas production.
Vedanta is diversified natural resources company. Co.'s business is principally located in India. Co. maintains operations in Australia, United Arab Emirates, South Africa, Namibia and Ireland. Co. is primarily engaged in zinc, oil and gas, iron ore, copper, aluminium and commercial power generation businesses and is also developing and operating port operation businesses and infrastructure assets. Co.'s operations are organized along four business divisions: Zinc (fully-integrated zinc business operated by HZL); Oil & Gas (domestic oil production through Cairn India); Iron Ore; Copper (custom smelting); Aluminum (Balco); and Power (multiple power plants across locations in India).
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