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Synopsis: ICICI Securities has issued a 'Buy' recommendation for Vedanta Ltd with a target price of Rs600, citing 18% potential upside. Key growth areas include aluminium and Zinc India divisions, and the upcoming demerger is expected to unlock significant value. With plans to reduce debt by $3 billion and a sustainable dividend yield above 5%, Vedanta is positioned for long-term growth.
Key Growth Drivers and Strategy
ICICI Securities emphasizes that Vedanta’s strategic focus revolves around the ‘Vs’—volume, value, and cost reduction—across its various segments. The aluminium and zinc divisions are expected to benefit from strong operational plans, with oil and gas production anticipated to bottom out by FY26. This, coupled with growth vectors, is projected to reduce debt by $3 billion over the next three years.
Furthermore, the forthcoming demerger of Vedanta into six separate entities is expected to offer investors a chance to invest in more specialized companies. Each new entity will focus on specific sectors such as aluminium, oil & gas, power, steel, and base metals. This restructuring is aimed at unlocking shareholder value, improving segment-wise performance, and sharpening growth trajectories for individual divisions.
Financial Outlook
ICICI Securities forecasts an EBITDA compound annual growth rate (CAGR) of 25% until FY26, with an estimated return on equity (RoE) between 40-45% over the next two years. In addition, a dividend yield of over 5% per annum is expected to continue, making Vedanta an attractive long-term investment.
Disclaimer: Stock market investments are subject to risks. The information provided here is for informational purposes only and does not constitute financial advice. Please consult a financial advisor before making any investment decisions.
