- Vedanta shares hit a fresh 52‑week high, up 3% on the back of copper and zinc price rebounds.
- Brokerages have lifted target prices, implying up to 18% upside from current levels.
- The approved demerger will create five listed entities, unlocking hidden value.
- Commodity up‑cycle, cost cuts and volume growth project a 20% CAGR in EBITDA through FY28.
- Dividend outlook remains attractive across the newly split businesses.
Most investors missed the demerger catalyst—now's your chance to profit.
Why Vedanta's Share Surge Beats the Market Trend
The stock’s rally is not a fleeting reaction to a single metal price move. Copper on the London Metal Exchange nudged the $13,400 mark, while zinc rose about one percent, creating a dual‑commodity tailwind that directly feeds Vedanta’s core earnings. Unlike broader market indices that hovered flat, Vedanta outperformed, signaling that the market is pricing in more than just short‑term price spikes.
Decomposing the Demerger: Five New Listed Entities
Last month the NCLT green‑lit Vedanta’s split into five distinct listed companies: Vedanta Ltd (base metals), Vedanta Aluminium, Talwandi Sabo Power, Vedanta Steel & Iron, and Malco Energy. Each entity will carry a clean balance sheet and a focused growth narrative. The separation allows analysts to apply sector‑specific multiples, often higher than conglomerate‑wide averages, thereby unlocking hidden value. For instance, pure‑play aluminium peers trade at 6‑7 × EBITDA, a premium to the current group‑wide multiple.
Commodity Upside: Copper, Zinc and Aluminium Price Dynamics
Global supply deficits are tightening across key base metals. LME aluminium, zinc and silver have historically averaged $2,170, $2,754 and $22.7 per ounce respectively (FY16‑FY26). Forecasts now assume FY27‑FY28 prices of $3,000‑$3,000 for aluminium, $3,000‑$2,900 for zinc and $60 per ounce for silver. The upward revisions reflect constrained mine output and rising demand from green‑energy projects. Higher commodity prices directly lift Vedanta’s cash‑flow, as the firm’s cost base is relatively fixed in the short term.
Financial Forecasts: EBITDA Growth and SOTP Valuation
Nuvama’s revised FY27‑FY28 EBITDA estimates rose 17% and 8% respectively, projecting a 20% compound annual growth rate through FY28. Using a sum‑of‑the‑parts (SOTP) framework, the firm’s fair value climbs to Rs 806 per share, up from Rs 686—a near‑18% upside at current market prices. The SOTP approach values each demerged unit separately, applying sector‑specific EV/EBITDA multiples and then aggregating the results. This method captures the premium investors assign to pure‑play businesses versus a diversified conglomerate.
Peer Landscape: How Tata and Adani React to the Metals Rally
Peers in the Indian mining space, such as Tata Steel and Adani Enterprises, have also benefitted from the commodity up‑cycle, but their exposure is more diversified across steel, logistics and renewable assets. Their stock price appreciation has been muted relative to Vedanta because a larger portion of earnings is tied to lower‑margin downstream operations. Vedanta’s focus on high‑margin base metals gives it a structural advantage, especially when the market rewards commodity‑centric earnings.
Investor Playbook: Bull and Bear Scenarios
Bull case: The demerger completes without regulatory snags, commodity prices stay above the revised forecasts, and the SOTP valuation multiples hold. In this environment, Vedanta’s share price could climb to the Rs 806 target, delivering an 18% upside. Dividend payouts of roughly Rs 15 from Vedanta Aluminium and Rs 5 from Vedanta Ltd add cash yield to the total return.
Bear case: Delays in the demerger, a sudden correction in copper or zinc prices, or a rise in financing costs could compress EBITDA growth. A 10% drop in commodity prices would shave several hundred million rupees off projected earnings, potentially pulling the stock back below the Rs 650 level.
Investors should weigh their risk tolerance, monitor the demerger timeline, and keep a close eye on LME price movements. A staggered entry—partial position now with additions on price dips—can capture upside while limiting exposure to volatility.
Disclaimer: Recommendations, suggestions, views and opinions expressed are those of the analysts and do not reflect the views of the publishing platform.