Result Analysis: Vedanta Limited (CMP: Rs.319.85) Result Update: Q3FY23

Vedanta Limited, a subsidiary of Vedanta Resources Limited, is a diversified global natural resources company with significant operations in Oil & Gas, Zinc, Lead, Silver, Copper, Iron Ore, Steel, and Aluminium & Power across India, South Africa and Namibia. For two decades, Vedanta has been contributing significantly to nation building. Governance and sustainable development are at the core of Vedanta’s strategy, with a strong focus on health, safety, and the zenvironment. Vedanta has put in place a comprehensive framework to be the ESG leader in the natural resources sector.

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    Stock Details
    Market Cap. (Cr.) 118895
    Equity (Cr.) 371.72
    Face Value 1
    52 Wk. high/low 441 / 206
    BSE Code 500295
    NSE Code VEDL
    Book Value (Rs.) 145.91
    Sector Mining & Mineral Products


    Key Ratios
    Debt-equity: 0.87
    ROCE (%): 29.37
    ROE (%): 37.14
    TTM EPS: 43.5
    P/BV: 2.2
    TTM P/E: 7.35

    Result Highlights:

    • Vedanta’s 3QFY23 Revenue decreased by 7% QoQ to ₹33,691 crore on account of moderation in output commodity prices and lower strategic hedging gains; partially offset by favorable foreign exchange movement.

    • The company’s EBITDA declined by 12% QoQ to ₹7,100 crore on account of lower output commodity prices, lower strategic hedging gains; partially offset by improved operational performance, easing of input commodity inflation and foreign exchange gains. Whereas the EBITDA margin stood at 23.10% in 3QFY23 down by 1069 bps YoY and by 7 bps sequentially.

    • Depreciation & amortization increased by 4% QoQ to ₹2,720 crore mainly due to higher depletion charge in Oil & Gas business.

    • Vedanta’s finance cost decreased by 4.26% QoQ to ₹1,572 crore, majorly due to decrease in average borrowings and higher interest capitalization. Whereas, Investment Income improved 8% QoQ to ₹679 crore, majorly due to increase in average interest rate.

    • The company’s normalized Effective tax rate (ETR) was 24% in 3QFY23 compared to 44% in 2QFY23, majorly due to 80IA benefit and change in profit mix.

    • Profit after Tax of the company was higher by 14.94% QoQ but declined by 42.25% YoY to ₹3,092 crore. Although the PAT margin improved by 176 bps QoQ but declined by 671 bps YoY to 9.18%.

    • Gross debt stood at ₹61,550 crore as on 31st Dec’22. Whereas the Net debt of the company was of ₹38,076 crore as on 31st Dec’22; Net debt to EBITDA ratio was at 0.96x.

    • Vedanta declared its 4th interim dividend of Rs12.5/share.

    • The company continues to maintain strong double-digit return on capital employed of ~23%.

    • Vedanta showed significant improvement in ESG score by various key external ESG rating agencies, like it is ranked 6th among DJSI’s top 10 global diversified Metal & Mining peers.


    Financial  Performance:

    Shareholding Pattern:

    Particulars %
    Promoters & Promoter Group 69.69%
    FIIs 8.30%
    DIIs 11.04%
    Public 9.36%
    Others 1.61%

    Management Commentary:

    • Mr Sunil Duggal, Chief Executive Officer, Vedanta, said “we have delivered a strong set of financial results and steady operational performance in challenging macroeconomic environment. Free cash flow (pre capex) stood at ₹6,504 crore with focus on working capital and cost optimization. We have approved plans for another 941 MW RE power under group captive RE power development program. I am also happy to share that Vedanta and Hindustan Zinc Limited Boards have taken strategic initiative to consolidate Zinc International under Hindustan Zinc. It will be a win-win transaction, unlocking significant value for both Vedanta Limited and Hindustan Zinc Limited shareholders.”


    Vedanta reported mixed results for its 3QFY23. Strong performances at Zinc International, Zinc India, power, and Oil & Gas (O&G) divisions were offset by weak performance in the steel, aluminium, and iron ore businesses due to lower commodity prices. Operational performance remained strong with the aluminium and zinc international businesses which recording their highest-ever volumes. Despite all of this the company showed a decline in EBITDA on both YoY basis as well as sequentially. Although Vedanta could benefit from the strategic initiative to consolidate Zinc International under Hindustan Zinc. For the nine months of FY23 vedanta has reported the earnings of Rs.23.44 and we expect the company to close the FY23 at the eEPS of Rs.29.3. Based on the estimated earnings the company is available at PEx of 10.91 at the current market price.


    Particulars (In Rs. Cr.) Q3FY23 Q2FY23 Q3FY22      QoQ % YoY% 9MFY23 9MFY22          YoY%
    Revenue from Operations 33,691 36,237 33,697 -7.03% -0.02% 1,08,179 91,850 17.78%
    Other operating income 411 417 400 -1.44% 2.75% 1,199 1,060 13.11%
    Other Income 716 697 577 2.73% 24.09% 2,146 1,989 7.89%
    Total Income 34,818 37,351 34,674 -6.78% 0.42% 1,11,524 94,899 17.52%
    Costs of Materials 11,113 10,666 9,563 4.19% 16.21% 32,553 25,937 25.51%
    Purchase of stock-in trade 0 1 10 -100.00% -100.00% 13 98 -86.73%
    Change in inventory -414 769 -440 -153.84% -5.91% -458 -1,406 -67.43%
    Employee expense 727 783 714 -7.15% 1.82% 2,290 2,091 9.52%
    Other Expense 8,449 8,183 6,939 3.25% 21.76% 25,351 20,168 25.70%
    Power and Fuel Expense 7,160 8,553 6,501 -16.29% 10.14% 24,666 14,831 66.31%
    EBITDA 7,783 8,396 11,387 -7.30% -31.65% 27,109 33,180 -18.30%
    EBITDA Margin (%) 23.10% 23.17% 33.79% -7 bps -1069 bps 25.06% 36.12% -1106 bps
    Finance Cost 1,572 1,642 1,216 -4.26% 29.28% 4,420 3,464 27.60%
    Depreciation & Amortisation expense 2,720 2,624 2,274 3.66% 19.61% 7,808 6,516 19.83%
    Net exceptional gain/(loss) 903 234 -105 285.90% -960.00% 1,137 -432 -363.19%
    Profit Before Tax 4,394 4,364 7,792 0.69% -43.61% 16,018 22,768 -29.65%
    Tax 1,302 1,674 2,438 -22.22% -46.60% 4,644 6,320 -26.52%
    Profit After Tax 3,092 2,690 5,354 14.94% -42.25% 11,374 16,448 -30.85%
    PAT Margin (%) 9.18% 7.42% 15.89% 176 bps -671 bps 10.51% 17.91% -740 bps
    EPS (in Rs.) 6.64 4.88 11.24 36.07% -40.93% 23.44 35.09 -33.20%


    Segment Income (In Cr.) Q3FY23 Q2FY23 Q3FY22 QoQ % YoY% 9MFY23 9MFY22 YoY% Segment %
    Zinc & Lead -India 6,630 6,999 6,736 -5.27% -1.57% 21,695 16,867 28.62% 19.60%
    Silver – India 983 1,079 1,081 -8.90% -9.07% 3,171 3,170 0.03% 2.91%
    Zinc -International 1,145 1,440 1,079 -20.49% 6.12% 4,044 3,242 24.74% 3.38%
    Oil & Gas 3,810 3,869 3,113 -1.52% 22.39% 11,762 8,490 38.54% 11.26%
    Aluminium 11,877 13,486 13,024 -11.93% -8.81% 40,007 35,406 12.99% 35.10%
    Copper 4,158 4,011 3,741 3.66% 11.15% 12,384 10,800 14.67% 12.29%
    Iron Ore 1,411 1,506 1,416 -6.31% -0.35% 4,284 4,484 -4.46% 4.17%
    Power 1,693 1,844 1,638 -8.19% 3.36% 5,307 4,139 28.22% 5.00%
    Others 2,127 2,245 1,943 -5.26% 9.47% 6,228 5,416 14.99% 6.29%
    Total 33,834 36,479 33,771 -7.25% 0.19% 1,08,882 92,014 18.33% 100.00%
    Less: Inter-segment revenue 143 242 74 -40.91% 93.24% 703 164 328.66%
    Income from Operations 33,691 36,237 33,697 -7.03% -0.02% 1,08,179 91,850 17.78%
    Source: Company website, EWL Research

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