Vedanta hits fresh 52-week high, shares rally 13% so far this year; should you buy now or sell?

Vedanta share price soared nearly 3% on Tuesday morning to hit a fresh 52-week high as the mining major extended its year-to-date gains to more than 13%.

Vedanta share price soared nearly 3% on Tuesday morning to hit a fresh 52-week high as the mining major extended its year-to-date gains to more than 13%. In a recent analyst meeting, the company’s management shed light on its debt reduction plans at the parent level and said that they remain upbeat on demand for metals and minerals on the back of a surge in demand for EVs and renewable energy. Analysts see further upside in Vedanta’s share price while advising investors to buy more shares of the company. Vedanta shares were trading 2.9% higher at Rs 412.75 per share on Tuesday morning.

Upside potential 

Analysts at Systematix Institutional Equities have a ‘Buy’ rating on the stock with a target price of Rs 567 per share. “We note that Vedanta has demonstrated strong execution capabilities over the last few years. It has been in the lowest decile cost curve across businesses (except oil & gas),” they added in a note. The brokerage firm highlighted that institutional investors have steered clear of Vedanta owing to various reasons such as high debt at the promoter level, unrelated investments and the cyclical nature of its business. “We believe the investor aversion on Vedanta stock is unwarranted. Notably, Jindal Steel & Power and JSW Steel have high levels of debt at promoter entities and related party transactions, but the stocks have elicited investor participation,” they said.

The brokerage firm believes deeper investor engagement, a more consistent dividend policy and a measured approach towards new ventures will lead to a gradual re-rating in Vedanta stock. 

Meanwhile, IIFL Securities has an ‘Add’ rating on the scrip with a target price of Rs 424 per share. “At the analyst meeting, Vedanta Chairman highlighted debt reduction of $5 billion over 3 years at parent Vedanta Resources as a top-most priority, led by an elevated $2 billion annual dividend payout by Vedanta. The brokerage firm said that group deleveraging, growth capex is in focus for Vedanta. 

Technical analysts at Motilal Oswal have picked Vedanta as their Technical pick of the day with a target of Rs 425 per share and a stop loss of Rs 388 apiece. Fundamental analysts have a target price of Rs 459 per share with a neutral rating. “The stock trades at 4.9x/5.4x FY23E/FY24E EV/EBITDA. At current prices, we do not expect a favorable risk-reward scenario in the stock. Oil, Steel, Aluminum, Zinc – all major commodities which VED produces are above the cycle averages and are supported by the Russia-Ukraine conflict,” they added.

Key risks for Vedanta

Analysts at Systematix Institutional equities said that recent volatility in commodity prices and a likely increase in FSA linkage coal prices by Coal India remain the key monitorables for Vedanta stock. Analysts at Motilal Oswal also added that any reduction in commodity prices may restrict Vedanta’s ability to deliver higher dividends or continue with growth Capex and could keep the leverage at the parent level elevated. 

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