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Earnings beat led by outperformance of the aluminum business

Consolidated result highlights

* Vedanta (VEDL) reported a consolidated revenue of INR399b (+6% YoY and +5% QoQ) against our est. of INR371b, driven by higher LME, improved premiums, and forex gains in 2QFY26.

* Consolidated EBITDA stood at INR114b (+16% YoY and +15% QoQ) against our est. of INR96b, driven by higher premiums and forex gains, partially offset by higher costs and lower volumes.

* EBITDA margin for 2QFY26 stood at 28.6% compared to 26.2% in 1QFY26 and 26.1% in 2QFY25.

* APAT for the quarter stood at INR33.5b (+13% YoY and +5% QoQ) against our estimate of INR21.7b.

* The company reported an exceptional item of INR20.7b towards trade receivables written off and capital creditor settlement.

*  In 1HFY26, revenue stood at INR777b (+6% YoY) and EBITDA was INR213b (+8%), while APAT remained flat YoY to INR65b.

Segmental result highlights Aluminum:

*  VEDL produced 617kt of aluminum, registering a growth of 1% YoY and 2% QoQ, whereas the alumina production from Lanjigarh refinery grew 31% YoY and 11% QoQ to 653kt in 2QFY26.

* Net sales stood at INR156.7b (+14% YoY and+8% QoQ), in line with our est., while EBITDA grew 46% YoY and 24% QoQ to INR55.3b vs our est. of INR45.8b in 2QFY26.

* Aluminum’s cost of production stood at USD1826/t (+5% YoY and +3% QoQ) during the quarter.

Zinc India (HZL):

* Hindustan Zinc’s (HZ) revenue at INR85.5b (+4% YoY/+10% QoQ) remained largely in line with our est. of INR81b. The growth was driven by better commodity prices, offset by lower volumes.

* EBITDA was also in line at INR44.5b (+7% YoY/+15% QoQ) during the quarter. EBITDA margin stood at 52% in 2QFY26 vs. 49.7% in 1QFY26 and 50% in 2QFY25. The improvement was primarily on account of favorable metal prices and lower cost of production.

* Zinc CoP for the quarter stood at USD994/t, which declined 7% YoY/2% QoQ due to softened input commodity prices and higher by-product realizations.

* APAT stood at INR26.5b (+14% YoY/+19% QoQ) vs. our est. of INR25b.

* Mined metal for the quarter stood at 258kt (+1% YoY/-3% QoQ), led by better mine metal grades and improved recoveries.

* Refined metal production for 2Q stood at 247kt. Refined zinc production was 202kt (+2% YoY/flat QoQ), while the refined lead production stood at 45kt (-29% YoY/-7% QoQ), due to lower pyro plant availability.

* Salable silver production declined 22% YoY and 4% QoQ to 144kt, in line with lower lead production.

Zinc International:

* Mined metal production rose 38% YoY and 6% QoQ to 60kt, driven by higher milled tons and better lead grades.

* Revenue stood at INR12.4b, up 22% YoY and 8% QoQ, while EBITDA declined 1% YoY and 12% QoQ to INR3.7b, led by a rise in CoP by 24% YoY and +17% QoQ to USD1,482/t in 2QFY26.

Copper:

* Copper cathodes production stood at 40kt, down 3% YoY and 9% QoQ due to temporary disruptions in raw material sourcing during the quarter.

* Revenue came in at INR66b (+4% YoY and QoQ), while reported EBITDA loss was INR130m in 2QFY26 against a loss of INR100m in 2QFY25 and INR260m in 1QFY26.

Iron Ore:

* Saleable ore production stood at 1.1mt, down 19% YoY and 41% QoQ on account of prolonged monsoon. Pig iron production rose 26% YoY and 12% QoQ to 238kt over the debottlenecking of the blast furnace.

* Revenue stood at INR14.5b (+6% YoY and +9% QoQ), while EBITDA declined 21% YoY and 47% QoQ to INR1.1b during the quarter.

Highlights from the management commentary

* The company maintained full-year capex guidance of USD1.7-1.9b for FY26, with USD0.9b already invested in 1HFY26.

* Hot metal cost increased to USD1,826/t in 2Q, compared to USD1,765/t in 1Q. Management targets to reduce hot metal costs to below USD1,650/t in 2HFY26, driven by lower power and alumina input costs.

* Alumina cost is expected to decline USD50/t for the next two quarters, aided by lower third-party purchases and higher captive share via Lanjigarh.

* PLF guidance: Meenakshi 65% (INR4.7/unit cost, INR5.7/unit realization), Athena 87% (INR2.8 cost, INR5.7 realization) by 4QFY26.

* VEDL expects a stronger 2H operational run rate across aluminum, zinc, power, and steel segments, which will drive higher consolidated earnings.

Valuation and view

* VEDL’s 2QFY26 performance came in better than our expectation, mainly driven by the outperformance of the aluminum business. We increase our FY26 revenue, EBITDA, and PAT estimates by 4%, 2%, and 4%, factoring in the earnings beat in 2QFY26 and a stronger near-term outlook. We largely retain FY27 earnings.

* Capex plans are progressing well and will likely lead to further cost savings. Management targets to maintain strong growth in earnings, led by the upcoming capacity, which will produce higher VAP products. VEDL remains firm on its deleveraging plans, and going forward, higher cash flows will support both its expansion plans and deleveraging efforts.

* The stock currently trades at 5.7x EV/EBITDA and 3.4x P/BV on the FY27 estimate. We reiterate our Neutral rating on the stock with a SoTP-based TP of INR550.

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