Vedanta (NYSE:VEDL) Ltd's share price has experienced a 15% rise from its one-year low point of Rs 207.85 on September 28, notwithstanding a Q2 net loss of Rs 1,783 crore brought about by sluggish sales. The company's aluminium and iron & steel divisions, however, have surpassed market predictions.
In a sequential comparison, Vedanta managed to reduce its net debt by Rs 1,700 crore to Rs 57,800 crore. Parent company Vedanta Resources (VRL) is preparing for a $1 billion debt repayment due in January 2024, stated CLSA.
The global brokerage has given Vedanta an 'Outperform' rating but proposed a stock target of Rs 230, indicating potential downside. Systematix Institutional Equities, on the other hand, raised Vedanta's target price to Rs 323 per share from its previous Rs 317, valuing the company at 4.5 times FY25 EV/Ebitda and taking into account lower net debt levels.
The brokerage also highlighted the benefits of an arbitration award and lower tax rates which are expected to reduce cash outflows over the next four to five quarters.
Kotak Institutional Equities expressed concerns over possible refinancing challenges due to high global interest rates, weak commodity prices, and elevated risk premiums. The firm also cautioned that Vedanta's high leverage and negative Free Cash Flow (FCF) could potentially constrain future dividend distributions.
InvestingPro Insights
Based on real-time data from InvestingPro, Vedanta operates with a significant debt burden. This aligns with the report of Vedanta's net debt reduction, but the company still carries a substantial amount of Rs 57,800 crore. In addition, Vedanta is quickly burning through cash, which resonates with concerns raised by Kotak Institutional Equities about the company's high leverage and negative Free Cash Flow (FCF).
InvestingPro Tips also suggest that the stock is currently in overbought territory. This may be a result of the recent 15% rise in the share price from its one-year low point. Despite these concerns, Vedanta remains a prominent player in the Household Durables industry, which could potentially influence its future performance.
For more comprehensive insights and additional tips, consider exploring InvestingPro's product offerings. In total, there are 15 InvestingPro Tips available for Vedanta, providing a more thorough understanding of the company's financial health and market positioning.
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