- Vedanta’s Q3 FY26 EBITDA margin jumped to 32.5%, a 4% point gain YoY.
- Revenue grew 19% YoY, beating consensus by INR32 billion.
- Valuation now sits at 7× EV/EBITDA and 4.4× P/BV for FY27 – still room for upside.
- Sector peers are lagging; Tata Steel’s margin slipped to 21% in the same quarter.
- Historical pattern shows margin spikes often precede a 12‑18 month earnings acceleration.
You missed Vedanta's margin surge—now's the chance to decide if it’s a hidden gem or a trap.
Why Vedanta's Margin Expansion Beats Industry Benchmarks
Vedanta reported a consolidated EBITDA of INR 152 billion for Q3 FY26, a 37% YoY rise and a 33% QoQ jump. The EBITDA margin of 32.5% eclipses the 28.6% seen in the previous quarter and the 28.4% recorded a year earlier. In the Indian mining and metals space, the average EBITDA margin hovers around 22%–24%, driven by volatile LME (London Metal Exchange) prices and high operating costs. Vedanta’s ability to push the margin into the low‑30s suggests a structural cost advantage and superior price capture.
Sector Trends: LME Prices, Volume Recovery, and Forex Gains
The global LME price rally in 2025–26 added roughly INR 25 billion to Vedanta’s top line. Simultaneously, the company lifted copper, zinc and aluminium volumes by 8% YoY, reflecting a rebound in industrial demand across China and Europe. A weaker rupee added a 2% foreign‑exchange tailwind to consolidated revenue. These three pillars—commodity pricing, volume, and currency—are the primary drivers behind the 19% revenue growth, and they align with a broader recovery in the Indian mining sector, where the Ministry of Mines reported a 12% increase in total metal output in FY26.
Competitor Landscape: How Tata, Hindalco, and Adani are Responding
Tata Steel posted a 21% EBITDA margin in the same quarter, pressured by higher raw‑material costs and a slower steel rebar market. Hindalco’s aluminium business saw margins dip to 16% after a sharp rise in bauxite prices. Adani’s newly launched copper assets are still in ramp‑up mode, delivering a modest 18% margin. None of these peers have yet matched Vedanta’s cost‑control narrative, which includes a 5% reduction in SG&A expenses and a strategic shift to higher‑margin zinc concentrates. The divergence creates a relative value gap: Vedanta trades at 7× EV/EBITDA versus an industry average of 9.5×, implying a potential discount.
Historical Context: Margin Surges and Subsequent Share Performance
Looking back at FY22, Vedanta’s EBITDA margin jumped from 24% to 30% after a series of cost‑cutting initiatives and a favorable copper price environment. The stock rallied 45% over the following 12 months, outpacing the Nifty Metal index by 18 percentage points. A similar pattern unfolded in FY18 when the margin crossed the 28% threshold, leading to a 38% share price appreciation in the next nine months. These precedents suggest that a sustained margin expansion can act as a catalyst for multi‑digit equity gains, provided the underlying fundamentals remain intact.
Decoding the Numbers: EBITDA, EV/EBITDA, and P/BV Explained
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) measures operating profitability stripped of capital‑structure and non‑cash items, making it a clean yardstick for cash‑flow generation. EV/EBITDA compares enterprise value (market cap + debt – cash) to EBITDA, indicating how much investors are paying for each unit of operating profit. A 7× EV/EBITDA implies the market values Vedanta at seven times its annualised EBITDA, which is modest for a capital‑intensive miner. P/BV (Price‑to‑Book Value) reflects how the market prices a company relative to its net asset base; 4.4× suggests a premium, but still below many global peers that trade above 6×.
Valuation Snapshot: Is INR 810 a Fair Target?
Motilal Oswal’s SoTP (Sum‑of‑the‑Parts) model arrives at an INR 810 target price, equating to a forward‑EV/EBITDA of roughly 6.5× once FY27 forecasts are incorporated. The model assumes a 10% YoY EBITDA growth trajectory, sustained margin improvement to 34%, and a stable rupee outlook. Discounted cash‑flow (DCF) calculations using a 9% WACC and a terminal growth rate of 2.5% converge on a similar intrinsic value, reinforcing the neutrality of the rating. The upside potential is modest—about 12% from current levels—yet the downside risk is limited given the strong cash‑flow generation and a healthy balance sheet (net debt to EBITDA < 2×).
Investor Playbook: Bull vs. Bear Cases
Bull Case: Continued LME price strength, further volume ramp‑up, and incremental cost efficiencies push EBITDA margins above 35% by FY28. This would compress EV/EBITDA to sub‑6×, unlocking a 20%‑25% upside to the INR 810 target. Additionally, any strategic divestiture of non‑core assets could further improve return on capital.
Bear Case: A reversal in global metal prices, coupled with tighter environmental regulations, erodes Vedanta’s pricing power. Margin compression back to the high‑20s would widen the EV/EBITDA multiple, pressuring the share price toward INR 650. A sudden surge in debt servicing costs could also strain cash flow.
Given the current data, the neutral stance remains prudent, but the margin breakout offers a window for tactical positioning. Investors comfortable with modest risk may consider a partial allocation, monitoring LME trends and Vedanta’s quarterly cost‑control updates.