Buy Vedanta; target of Rs 330: ICICI Securities

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • Zinc India remains the key earnings driver: Supported by elevated prices, lower costs, and record silver output, Zinc India's strong performance drives VEDL's earnings.
  • Growth capex and new projects: VEDL's FY27 capex guidance of INR 65bn includes INR 40bn for Zinc India, supporting medium-term expansion and growth.
  • Debt reduction and parent-level deleveraging: Management targets reducing Vedanta Resources' debt to USD 3bn over three years, supported by dividend flows and operating cash generation.
  • Copper business shows structural strength: India's copper business continues to show record quarterly production, despite international sales being exposed to geopolitical and supply-chain risks.

Thesis Validation Checklist

To validate the thesis, watch for:

  • Zinc prices and production volumes: Higher-for-longer zinc prices and VEDL's ability to maintain production volumes will be key to sustaining earnings growth.
  • Silver prices: Some recovery in silver prices will partially offset operational efficiencies in the near term.
  • Debt reduction: Progress in reducing Vedanta Resources' debt will be crucial for parent-level deleveraging and overall financial health.
  • Project execution: Successful execution of growth projects, such as the Debari smelter expansion and Gamsberg Phase 2, will support medium-term growth. These signals will indicate whether the investment thesis is playing out as expected.