Vedanta dividend yield makes ‘stock attractive’, brokerages bullish

“Besides firm zinc prices, aluminium prices too firmed up recently. The benefits of cost savings in aluminium via 3mtpa alumina expansion in FY24 and usage of captive coal would reduce CoP structurally. Besides, a 16% dividend yield makes the stock attractive; we recommend a ‘BUY’ on Vedanta shares with a target price of ₹428 (from ₹374),” said brokerage Edelweiss.

Though, the global macro environment is likely to weigh on any significant improvement in LME prices and the China opening is expected to support demand and prices, but fears of recession in Europe continue to raise concerns, as per another brokerage Motilal Oswal.

“The reduction in metal prices will be partly offset by reduction in input costs, namely thermal coal. We reiterate our Neutral rating on VEDL as we believe the current environment is fully priced in. We lower our SoTP-based TP to ₹330. While we marginally reduce our aluminum price assumptions, savings from captive/linkage coal should help offset the downtrend,” the note stated.

Vedanta recently commenced its operations at the Jamkhani coal mine and with more mines scheduled to open, Vedanta is on track to achieve 100% self-sufficiency in thermal coal. This would be a structural move towards reducing CoP, as per analysts. Vedanta expects the deal with Hindustan Zinc to fructify as it is value accretive to both the entities. The funds received by the company would be deployed based on its capital allocation policy. It could be used to pay dividend, capex and other purpose, the brokerage added.

Vedanta is a global natural resources company with operations in oil and gas, zinc, lead, silver, copper, iron ore, steel, and aluminium and power. The stock is down about 0.4% in a year’s period.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.