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Business News/ Markets / Stock Markets/  Vedanta share price falls over 2% on weak Q1FY24 numbers; here's what brokerages say

Vedanta share price falls over 2% on weak Q1FY24 numbers; here's what brokerages say

Vedanta's share price fell over 2% as Q1FY24 results disappointed investors. Net profit declined 40% YoY and sales decreased by 13% compared to the same period last year. Brokerages have downgraded the stock and reduced their target prices due to weaker commodity prices and mounting debt.

On Monday, Vedanta share price opened at ₹273.50 apiece on BSE. The stock touched an intraday high of ₹274.75 and low of ₹270.45.Premium
On Monday, Vedanta share price opened at 273.50 apiece on BSE. The stock touched an intraday high of 274.75 and low of 270.45.

Vedanta share price fell over 2% on Monday's trading session after the company's 1FY24 numbers fell in short of the street's expectations and dismayed investors.

Vedanta Limited recorded a 40% (YoY) fall in net consolidated profits from 5,592 crore to 3,308 crore in its first quarter results, which were released on Friday. The company's sales decreased by 13% from 38,251 crore in the first quarter of FY23 to 33,242 crore in the first quarter of FY24. The company declared an interim dividend of 18.5 per share, and during the first quarter, its dividend yield was 7%.

The company's net profit increased sequentially by 6% from 3,132 crore in Q4FY23 . According to the company, Q1FY24 revenue decreased (QoQ) principally due to a slowdown in output commodity prices and reduced sales volumes, which were somewhat offset by higher premiums.

Vedanta Q1 Results: Net profit declines by 40% (YoY) to 3,308 crore; declares dividend

On Monday, Vedanta share price opened at 273.50 apiece on BSE. The stock touched an intraday high of 274.75 and low of 270.45.

According to Rajesh Bhosale - Equity Technical and Derivative Analyst, Angel One, the stock has seen a huge gap down opening and has broken below its key support of 275 and has sustained below it.

"We sense there may further weakness in the near term and the prices are likely the slip towards the 260 - 255 levels. On the flip side, bearish gap left today around 275 - 278 to act as resistance," added Bhosale.

What do brokerages say?

Nuvama Institutional Equities

According to the brokerage's analysis, the company posted lower-than-expected EBITDA of 6,420 crore, down 31% from quarter to quarter. This was mostly due to lower commodity prices, particularly those for zinc and aluminium, which were partially offset by lower CoP. Volumes decreased due to seasonality. With EBITDA of 1,820 crore, down 6% QoQ, aluminium performed better. Due to higher dividend payments, Vedanta's (ex-Hindustan Zinc) net debt grew by 37% QoQ to 59,570 crore.

Due to weaker commodity prices, the brokerage has reduced FY24E/FY25E EBITDA by 18%/10%. Vedanta is compelled to take on external debt due to lowered cash creation in order to pay off its parent's debt via dividend. The brokerage firm thinks the risk-reward is unfavourable due to mounting debt.

The stock has been downgraded by the brokerage from 'Buy' to 'Reduce' and has been given a target price of 249 instead of 367.

"We do appreciate management’s commitment to repay Vedanta Resources Ltd debt, but it affects Vedanta Ltd's minority shareholders adversely. We note that recently Vedanta Resources sold 1.6% stake in Vedanta to repay its debt, but still holds 68.1% stake in Vedanta (had 50.1% stake in FY21). Ideally, Vedanta Resources should look for strategic buyers and offload its 18% stake to reach back to 50.1%, which will help solve its debt issues," said the brokerage.

Motilal Oswal Financial Services

The brokerage reported that while revenue was on track, Vedanta's EBITDA was slightly off. In accordance with the brokerage's forecast of 33,400 crore, the company's consolidated net sales came in at 33,700 crore (down 12% YoY). Lower volumes and lower commodity prices had a negative impact on revenue, which was only slightly offset by higher premiums and favourable exchange rate movement.

Consolidated EBITDA for the company was 6,400 crore (down 37% YoY), falling short by 6% of the projection of 6,800 crore. To 1,800 crore, the aluminium vertical experienced a 19% YoY decline.

"Globally, the commodities market is facing multiple headwinds such as inflationary pressure, monsoon-led seasonal slowdown, muted demand pick-up from China, and a slowdown in the Chinese real estate sector. We have largely retained our FY25 EBITDA and APAT forecasts. We reiterate our Neutral rating on Vedanta with an SoTP-based TP of 280," said the brokerage.

Kotak Institutional Equities

"We have cut consolidated EBITDA by 13%/7%/7% for FY2024E/25E/26E mainly led by lower zinc prices and higher brand fees (3% of revenue from 2% earlier) to Vedanta Resources Ltd effective FY2024E. Our FV reduces to Rs215 (Rs235 earlier) on SoTP basis on March 2025E. Maintain SELL on rich valuations," said the brokerage.

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Published: 24 Jul 2023, 01:31 PM IST
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