Edelweiss' research report on Vedanta
In our view, the temporary closure of Vedanta’s (VEDL) 5 units of Jharsuguda power plant is unlikely to impact Q2FY18 production volume, though Cost of Production (CoP) of aluminum may be USD15-18/t higher due to external procurement of 200MW for balance quarter. Management stated that it has taken remedial measures and expects the plants to restart at the earliest. However, we will keep a close watch on events because if the closure extends, the impact could be material going ahead. Maintain ‘BUY’ with TP of INR350, implying exit multiple of 4.6x FY19E EBITDA.
Outlook
More sweeteners in store; maintain ‘BUY’ We believe, the temporary partial closure of power plants at Jharsuguda will impact Q2FY18 EBITDA only marginally. We expect VEDL to maintain production volume as operating leverage benefits outweigh the impact of higher power cost in the short term. We will keep a close tab on events unfolding. We maintain ‘BUY/SO’ with target price of INR350/share.For all recommendations report, click here
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