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Steady operational performance....

Vedanta reported a steady operational performance in Q4FY21. For Q4FY21, Vedanta's consolidated total operating income was at | 28206 crore, up 43% YoY and 24% QoQ. Consolidated EBITDA for the quarter was at | 9037 crore, up 99% YoY, 17% QoQ. Consolidated EBITDA margin for Q4FY21 was at 32% compared to 23% in Q4FY20 and 34% in Q3FY21.

Ensuing PAT before exceptional items was at | 7013 crore. Vedanta's Q4FY21 consolidated topline was up 24% QoQ, 43% YoY, primarily due to higher volume at the aluminium business, Zinc India, iron ore business, higher power sales at Talwandi Sabo Power (TSPL) and improved commodity prices. EBITDA for Q4FY21 was up 17% QoQ, 99% YoY, primarily due to higher volume at Zinc India, aluminium and iron ore business along with higher commodity and oil prices in Q4FY21.

FY21 aluminium CoP at US$1347/t, lowest in last seven years

During FY21, the company achieved lowest aluminium cost of production (CoP) in the last seven years at US$1347/tonne (down 20% YoY). In FY21, it also achieved the highest ever aluminium production of 1969 KT, up 3% YoY, with 2.1 million tonnes per annum (MTPA) run rate achieved in Q4FY21. With respect to FY22, the company has guided aluminium production in the range of 2.1-2.2 MTPA while CoP is expected to be in the range of US$1475-US$1575/tonne. In FY21, the company also achieved highest ever Alumina production of 1841 KT, up 2% YoY. In FY22, the company has guided for Alumina production in the range of 1.8-2.0 MTPA. The company has also chalked out plans to increase the alumina capacity to 5 MTPA from 2 MTPA currently by Q1FY23.

O&G:

FY’22 average gross volume guidance is 175-185 kboepd With respect to the oil and gas business, in Q4FY21 average daily gross operated production was at 165 kboepd compared to 160 kboepd in Q3FY21. Operating cost during Q4FY21 was at US$9/boe compared to US$7.7/boe in Q3FY21. The increase in CoP was primarily due to workover and maintenance activities. For FY22, the average daily gross volume guidance is 175-185 kboepd with an operating cost guidance of US$8/boe.

Valuation & Outlook

Vedanta’s earnings remain sensitive to movement in commodity prices. The improvement in major commodity prices over the last couple of quarters augurs well for the company. We value the stock on an SoTP basis and arrive at a target price of | 300 (earlier | 180). We maintain our HOLD rating on the stock.

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