Emkay Global Financial Services has maintained its BUY call on Vedanta Limited, adjusting the target price downward to Rs 525 from Rs 550, reflecting a 25% potential upside from the current levels. The revision comes amid a steady Q4FY25 performance, marginal earnings downgrade for FY26–27, and the company’s continued progress on demerger and capacity expansion plans. The quarterly EBITDA was driven by robust performance in Aluminium and Zinc India divisions, supported by improving operational efficiencies, disciplined capital expenditure, and a healthier balance sheet.

Steady Operational Momentum in Q4FY25

Vedanta reported a consolidated EBITDA of Rs 116.2 billion in Q4FY25, exceeding Emkay's estimate by 4.5% and up 3.0% sequentially. The bulk of the EBITDA came from Aluminium (Rs 46.6 billion, +2.6% QoQ) and Zinc India (Rs 48.1 billion, +6.2% QoQ), together comprising 82% of the quarter’s EBITDA.

Silver price uptick and increased volumes in Zinc India also played a key role in margin resilience, while aluminium faced margin headwinds due to costlier carryover inventory. Despite macro challenges, the EBITDA margin held steady at 28.7%.

Strong Cash Flow and Debt Reduction Highlight Financial Discipline

Net debt reduced by 7.2% QoQ to Rs 532.5 billion, leading to a drop in net debt-to-EBITDA ratio to 1.2x from 1.4x in Q3. This reflects Vedanta’s ability to generate strong cash flows across cyclical phases.

Capital expenditure rose to Rs 52.6 billion during the quarter, focused on growth assets, especially in power, aluminium, and mining segments.

Project Pipeline and Strategic Updates: On Track for H1FY26 Launches

The company reiterated that key projects remain on schedule:

Lanjigarh Refinery Train 2: First metal output expected in Q1FY26.

435kt BALCO Aluminium smelter: Targeted commissioning by H1FY26.

Meenakshi Power Project (700MW) and Athena Plant (Unit 1): Scheduled for H1FY26.

Demerger Process: Under second motion with the NCLT; expected to complete by September 2025.

Mine development at Sijimali, Kuraloi, and Ghogarpalli is also expected to commence between Q3–Q4FY26, bolstering long-term resource security.

FY25 Performance: Turnaround Story Materializing

In FY25, Vedanta posted consolidated revenue of Rs 1.53 trillion (+6.4% YoY) and EBITDA of Rs 435.4 billion (+19.4% YoY), backed by improved realization across key commodities and strategic cost controls.

Net profit surged to Rs 138.5 billion in FY25 from Rs 79.6 billion in FY24, indicating a 74% YoY growth.

FY26–27 Outlook: Moderate EBITDA Recalibration

Emkay has trimmed EBITDA estimates by ~5% for FY26–27 on account of delayed captive coal mine commissioning and tempered zinc price expectations.

However, earnings growth remains robust:

FY26 EBITDA: Rs 489.1 billion

FY27 EBITDA: Rs 520.2 billion

The management remains confident in exceeding Rs 150 billion in EBITDA enhancements during 2025 under their restructuring and efficiency roadmap.

Valuation and Target Price

Emkay employs a sum-of-the-parts (SOTP) valuation model, factoring in full value unlocking from the ongoing demerger. The implied equity value stands at Rs 2.27 trillion with upside potential of ~39%.

The revised 12-month target price is Rs 525/share, offering 25.3% upside from the current market price of Rs 419.

Key Financials at a Glance

Stock Levels and Investment Recommendation

Current Market Price: Rs 419

12-Month Target Price: Rs 525

Upside Potential: 25.3%

Recommendation: BUY

Investment Horizon: 12–18 months

Conclusion

Vedanta's operational consistency, project visibility, and debt moderation collectively underpin its investment appeal. While earnings estimates have been pruned slightly, the demerger process and commissioning of growth assets provide meaningful catalysts for valuation rerating. For long-term investors, the stock offers a compelling risk-reward profile, particularly as it trades at 10x FY26E earnings with a healthy dividend yield.