Vedanta Q4 Results Review - Cash Generation To Remain Elevated: Systematix

Systematix Research Report

Vedanta Ltd.’s Q4 FY23 consolidated Ebitda at Rs 94.6 billion (-30.6% YoY, +33.8% QoQ) was 6% above our estimate.

Strong performance in the aluminium (+93% QoQ Ebitda) and zinc international (+43% QoQ Ebitda) segments was offset by weak performance in the oil and gas division which saw Ebitda decline by 16% QoQ.

Consolidated operating cash flow for FY23 remained strong at Rs 330 billion (-5% YoY) despite a 23% YoY decline in consolidated Ebitda in FY23. Ebitda to cash conversion (before working capital changes) remained strong at 99% in line with the three-year average of 100%.

Management remains bullish on the overall commodities demand scenario and has stepped up groupwide capex by more than 40% to $1.7 billion for FY24.

FY23 Dividend payout of Rs 299 billion (Rs 80/share) helped reduce debt at parent Vedanta Resources Ltd. by $2 billion. We believe dividend is likely to remain elevated at Rs 60-80/share over FY24/25 driven by a sharp reduction in energy costs, especially for coal, implying a yield of 22-29% providing strong downside support.

Vedanta consumes more than 36 million tonne of coal across its various business and the sharp 70% drop in coal prices is positive.

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