Hold Vedanta, target price Rs 170: Edelweiss

Edelweiss has hold call on Vedanta with a target price of Rs 170. The current market price of Vedanta Ltd. is Rs 181.75.
Vedanta Ltd., incorporated in the year 1965, is a Large Cap company (having a market cap of Rs 67281.26 Crore) operating in Diversified sector.

Financials
For the quarter ended 30-09-2020, the company reported a Consolidated sales of Rs 20804.00 Crore, up 32.62 % from last quarter Sales of Rs 15687.00 Crore and down -4.30 % from last year same quarter Sales of Rs 21739.00 Crore. Company reported net profit after tax of Rs 1644.00 Crore in latest quarter.

Investment Rationale
The brokerage expects the stock performance to suffer from the promoter group’s continual endeavours to increase their stake in the company since the failure of delisting in October 2020. The risk of prospective offers for acquisition/share purchase might be at discount to the prevailing price, which might yield sub-optimal capital gains for minority shareholders. While the healthy commodity outlook would result in sound cash accretion, the returns to shareholders would be limited, to a healthy dividend yield of 8–10%—an imperative given parent’s higher cash requirement. All in all, the brokerage is downgrading VEDL to ‘HOLD/SP’ with an unchanged TP of INR170/share, implying FY22E EBITDA of 3.2x.

Promoter/FII Holdings
Promoters held 50.1 per cent stake in the company as of June 30, 2020, while FIIs held 15 per cent, DIIs 19.1 per cent and public and others 15.8 per cent.