Vedanta Q2 Results Review – Energy Integration Positive; Outperformance To Stay: Systematix


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Systematix Research Report

Vedanta Ltd.’s Q2 FY23 consolidated Ebitda at Rs 76.9 billion (down 25.7% YoY, down 24.5% QoQ) was 3% below our estimate.

Strong performances at Zinc India, Zinc International, and oil and gas divisions were offset by weak performance in the aluminium business, where energy-related costs were higher than expected.

Operational performance stayed strong, with the aluminium and zinc international businesses recording highest-ever volumes, which were weak in the oil and gas business.

Vedanta maintained its capex guidance at $1.6 billion, with key focus on backward integrating the aluminium business, and increasing oil and gas output.

Cash generation could stay elevated over FY23-25E, supporting a high dividend payout (more than 50%).

Vedanta trades at ~20% dividend yield, which provides downside support. A revision of down 7%/ up 12% in our FY23E/24E Ebitda, respectively, reflects our marginally adjusted commodity price and cost assumptions.

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