​Vedanta jumps 5% after brokerage upgrade; CLSA sees over 15% upside

Shares of diversified metals in Wednesday's trade (April 10. 2024) marked a new 52-week high as the Hong-Kong based brokerage CLSA turned bullish on the counter and upgraded the stock to 'buy' from the previous 'underperform' call with the target raised to Rs 390 from the previous specified target of Rs 260. The fresh target price probable gains of 15 per cent in the stock.

The stock started the session  at Rs 346.4 and logged a fresh 52-week high of Rs 349.9 per share.

The stock as per the brokerage is a play on the commodity upcycle. Also, it maintains that because of the company's diversified exposure, it benefits from the gains in commodities. CLSA believes that growth and margin expansion capex to drive earnings. Also, the company’s efforts to raise capacity and profitability across segments through its ongoing capex program augurs well. CLSA raises Ebitda by 4-13 per cent over 24-26CL on higher commodity prices and lower cash cost assumptions.

The company aims to log EBITDA of nearly Rs 62,000 crore by FY27. Also, the reduction in debt of Vedanta Resources will be positive for the stock.

Currently, the stock is trading at 5.4 times EV/EBITDA and on re-rating, the valuation of 7 times EV/ EBITDA is estimated.

Besides at the current price, the stock is also lucrative in terms of dividend yield offering yield of 7-9 per cent.

At around 9:26 am, shares of the company zoomed to Rs 354.60, up 5 per cent or Rs 16.40 per share.

Vedanta is a diversified metals company operating across copper; aluminium; iron ore; power; zinc, lead and silver; oil and gas, and others. The company's peers include NLC India, Mishra Dhatu Nigam etc.