Motilal Oswal maintained a ‘Neutral’ rating on the stock, with a target price of Rs 810, implying an upside of about 6% from its current market price. The brokerage said Vedanta’s earnings were broadly in line with expectations, aided by favourable prices, improved volumes and lower costs, but noted that much of the near-term optimism is already reflected in the stock.
“VEDL’s 3QFY26 operational performance came largely as expected, supported by better volumes and favorable LME prices,” Motilal Oswal said, adding that it has raised its FY26 revenue, EBITDA and PAT estimates by 4%, 3% and 22%, respectively, to factor in the strong December-quarter performance.
The brokerage highlighted that the stock is trading at about 7x EV/EBITDA and 4.4x price-to-book on FY27 estimates, leading it to reiterate its Neutral stance.
Vedanta reported a 61% year-on-year jump in consolidated profit to Rs 5,710 crore for the third quarter, with revenue rising 19% to Rs 45,899 crore. EBITDA climbed 34% year-on-year and 31% sequentially to a record Rs 15,171 crore, while margins expanded sharply to 41%, supported by higher metal prices, stronger premiums, improved volumes and cost efficiencies.
The aluminium business stood out operationally, with alumina production rising 57% year-on-year to a record 794 kilo tonnes, while aluminium cost of production declined 11% year-on-year to $1,674 per tonne, aiding margin expansion. Zinc India and international zinc operations also delivered strong growth on the back of favourable commodity prices and improved volumes.
The stronger operating performance translated into better capital efficiency, with return on capital employed improving to 27%, up nearly 300 basis points from a year ago.
Technical signals point to near-term caution
From a technical perspective, the stock remains above all its key simple moving averages, indicating a strong underlying trend. However, momentum indicators suggest the stock may be overheated in the near term. The Relative Strength Index stands at 88.1, well above the 80 level typically considered strongly overbought, pointing to the possibility of a pullback even as the broader trend remains bullish.
With brokerages turning selective and upside appearing capped in the near term, the verdict for now appears less about chasing the rally and more about waiting for clarity on valuations and the next leg of earnings growth.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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