Vedanta stock price target raised to INR580 by CLSA on expansion projects

CLSA has raised its price target on Vedanta Ltd. to INR580 from INR520, maintaining an Outperform rating, following the company's strong Q2 FY26 EBITDA of INR114 billion which met consensus. Vedanta projects FY26 EBITDA to exceed US$6 billion, driven by higher commodity prices and operational improvements, including lower aluminum production costs and increased power sales. The outlook is further supported by ongoing expansion projects, backward integration initiatives, and a planned demerger by the end of fiscal year 2026, while the company also offers a substantial 10.16% dividend yield.

Analysis

Vedanta Ltd. (VEDL) has received a price target upgrade from CLSA to INR580 from INR520, maintaining an Outperform rating, following a strong Q2 FY26 EBITDA of INR114 billion, a 16% quarter-over-quarter increase that met consensus expectations. The stock has demonstrated robust performance with 6-month returns of 28.63% and is considered undervalued by InvestingPro's Fair Value model.

The company projects an optimistic FY26 EBITDA exceeding US$6 billion, surpassing CLSA's US$5.7 billion estimate, supported by US$2.5 billion already achieved in H1. This positive outlook is driven by anticipated higher commodity prices and significant operational improvements, including reduced aluminum production costs and increased power sales. Strategic initiatives like expansion projects and backward integration in key segments such as aluminum, power, and zinc are expected to be key performance drivers.

Financially, Vedanta offers an attractive 10.16% dividend yield, with a substantial 134.09% growth in the last twelve months, alongside an attractive EV/EBITDA ratio of 6.2. The parent company, Vedanta Resources, has reportedly secured funding for its debt, and a planned demerger is slated for completion by the end of fiscal year 2026, which could unlock further value. Investors should also monitor the outcome of Vedanta’s US$2 billion bid for Jai Prakash Associates.

Key Decisions for Investors

• Consider VEDL for exposure to potential upside from commodity price increases and operational efficiencies, supported by its strong FY26 EBITDA guidance and analyst upgrade.
• Monitor the progress of the planned demerger by FY26 end and the outcome of the US$2 billion bid for Jai Prakash Associates, as these events could significantly impact future valuation and corporate structure.
• Evaluate the sustainability of the substantial 10.16% dividend yield and its recent growth, which presents a compelling capital return component for income-focused portfolios.