Buy Vedanta Ltd for the Target Rs 350 by Emkay Global Financial Services Ltd
VEDL reported strong 1QFY27 EBITDA of Rs84.7bn (+8.8% qoq), broadly in line with our estimates (+6.2% vs consensus), with HZL contributing 96% of consolidated EBITDA. Zinc International continued to improve, with lower costs and Gamsberg Phase-II on track for Aug-26 commissioning, while Ferrochrome delivered a record quarter supported by higher realizations. Copper India volumes remained healthy, although Copper International was impacted by Middle East disruptions. We believe FY27 earnings are well bolstered, despite a 19.7% sequential correction in silver prices aided by firmer zinc prices (+3.8%), continued cost optimization, and supportive sulfuric acid pricing. Accordingly, we retain FY27E EBITDA, while cutting FY28-29E EBITDA by 4% to reflect a lower silver price assumption of $60/oz (vs $65/oz earlier). We maintain BUY on the stock and TP of Rs350.
HZL contributed 96% of the total EBITDA VEDL reported a strong 1Q EBITDA
of Rs84.7bn (+8.8% qoq), broadly in line with our estimates (+6.2% vs consensus). The sequential improvement was driven by a sharp uptick in HZL profitability. VEDL’s subsidiary HZL contributed 95.6% of consolidated EBITDA, helping log a strong 1Q with EBITDA at Rs81bn (already known; read: Pricing tailwinds give strong start to FY27), broadly in line with our estimate.
Other business updates
Zinc International continued to improve operationally, with mined metal production at 48kt (including 3kt from Black Mountain), while Gamsberg Phase-I production increased 10% qoq to 45kt. CoP declined 7% sequentially to $1,549/t, supporting EBITDA of $900/t. Management reiterated that Gamsberg Ph-II remains on track for commissioning in Aug-26 which will lift mine capacity to 450kt, while the Black Mountain underground mine is expected to start production in 2QFY27. VEDL also received Stage-I forest clearance for its manganese mine, with production targeted to begin in 2HFY27. Ferrochrome clocked a record quarter, with higher finished-product grades, improved realization, and lower costs driven by 100% captive ore availability, resulting in EBITDA improving to $360/t. Copper India sales stood at 53kt (+26% qoq), while Phase-I debottlenecking increased installed capacity to 222kt, with further expansion to 229kt underway. Copper International remains pressurized by Middle East-related supply chain disruptions. Management restated its focus on balancing growth investments with deleveraging, supported by a strong balance sheet and disciplined capital allocation.
FY27 earnings intact; lower Ag price causes a cut in our outer-year estimates
While Ag prices have corrected 19.7% QTD vs 1Q averages, we believe FY27 earnings remain well supported by firmer zinc prices (+3.8% QTD), sustained cost efficiencies, and supportive sulfuric acid pricing. We hence keep FY27E EBITDA broadly intact, while lowering FY28-29E EBITDA by 4% to incorporate a more conservative Ag price of $60/oz (vs $65/oz earlier). We maintain BUY on the stock and TP of Rs350.
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