Vedanta Resources is a diversified and integrated metals and mining group with annual sales of $1.9bn. Its principal operations are located in India, where it has a major market share in each of our main metals: aluminium, copper, zinc and lead. There are also substantial copper operations in Zambia and 2 copper mines in Australia.

            Red = 25 day moving average.           Green = 200 day moving average.

                        

Copper - (6 month graph)

SALES PER ACTIVITY (Data as of 31/03/2006)

Copper:      60%
Zinc:         24%
Aluminium:  12%
Others:       4%

rose (red) coloured specs .... 10 year chart shows a pretty sad performance

Barclays note today:
"· Vedanta reported EBITDA of $2336m, 2% ahead of our estimate and +4% vs. consensus. EBITDA declined –18% HoH in H2 and was down –38% YoY for the FY. Underlying PAT pre-minorities was -$29m vs. our estimate of +$1m. Due to the volatile minority line, underlying EPS was -$1.32 vs. our -$0.59 estimate and 19% below consensus (-$1.1). Surprisingly the company reinstated a final dividend of 30c/sh ($83m).

· Net debt: Importantly this fell to $7.329bn at March-16 vs. $7.5bn at Sept-15 and our estimate of $7.526bn. The drivers of the reduction were working capital inflow of $136m in H2, building on the inflow of $1030m in H1, plus significantly lower capex (H1: $651m, H2: $310m). However, ~50% of the $826m debtor/creditor inflow for the FY is expected to reverse in FY17. ND/EBITDA as a result was 3.14x LTM basis, vs. 2.58x reported in September. Using H2 EBITDA annualized, ND/EBITDA was 3.49x. The group’s covenants have been raised to 4x until March-17, declining to 2.75x by March-19. The company has $3.8bn maturing this year (2.5x market cap), of which $1.5bn is at PLC ($0.9bn already repaid by VEDL) and $2.3bn at the subsidiaries (yet to be refinanced).

· Guidance changes: Key elements pre-announced via subs reporting – see summary table below. Highlights include FY17 capex at Cairn cut to $100m (vs. $500m) but with production expected to remain broadly flat. Gamsberg FY17 capex $200m (vs. previously $60-100m). Zinc India $300m, opex stable (higher in H1) and marginally higher production. Ali/Power $400m. Overall FY17 growth capex expected at $1.0bn in line with prior $1bn.

· Impairments: As reported by the subs, Vedanta PLC reported a total impairment of $5.2bn pre-tax, including oil & gas assets and goodwill ($4.9bn), with the balance iron ore in Liberia and others.

· Key new number is KCM: with ~100% of EBITDA already released via the subs reporting, KCM (EBITDA –ve) is the only new operational data in the release. FY16 EBITDA was -$18m vs. our estimated -$30m. FY cash cost $1.975/lb vs. in H1 $2.10/lb. Q3 was $1.75/lb and Q4 $1.95/lb – the increase is due to power tariffs.

· Valuation not supportive: Spot PERs 303x and 20.7x 2016-17E, spot EV/EBITDA 7.5x and 6.5x 2016-17E, attributable FCF yield -6.9% and +13.0%.

Indian-based mining group Vedanta Resources has taken the “prudent” move to cut its dividend by more than half, as low commodity prices and a vast impairment in its oil and gas business pushed it to a loss.

The FTSE 250 company, which specialises in zinc but also produces copper and iron ore as well as oil and gas, cut its final dividend to 30 cents a share from 63 cents last year.

Vedanta reported a pre-tax loss of $4.98bn (£3.45bn) for the year to March 31. This was an improvement on the previous year, when it fell to a $5.6bn loss. Revenue fell from $12.88bn to $10.74bn.

Barclays note:
"Vedanta is turning a corner of sorts. Its maturity profile now looks manageable, and we expect net debt/EBITDA to decline in FY17 albeit due to EBITDA rising rather than net debt declining. The company’s principal commodity exposures, zinc and oil (56% of FY17 EBITDA), should offer some potential for upside. Some valuation metrics are starting to look interesting too with EV/EBITDA at 6.2x and 4.5x in CY16-17 while FCF/EV is 5% and 11%, respectively. That said, there is limited downside protection to the equity should commodity prices fall, on our estimates. Our spot NPV and SOTP both indicate negative equity values, in line with Vedanta’s negative book value just reported for March-16. Hence, we remain UW for now.
Refi remains a risk but now more manageable: Vedanta remains dependent on bank/bond markets to continue its refinancing program. While it has been successful so far, there are signs it is becoming trickier. The company has resorted to paying $1.8bn dividends from HZL in April (in the process losing $844m in withholding tax and minority payments) and factoring working capital (creditor days now 255). However, maturities over the next three years now stand at $10.9bn compared with cash and undrawn facilities of $10bn and cumulative FCF of $3.6bn post minorities.
Net debt likely to rise in FY17 but ratios coming down: We struggle to see how net debt will come down in FY17 in the absence of higher commodity prices, given the $844m HZL outflow, PLC dividend of $83m, higher capex and ~$400m working capital outflow as per guidance. However, due to higher oil and zinc prices plus some modest volume growth driving EBITDA up, we see net debt/EBITDA declining to 2.8x in FY17 (from 3.1x in FY16), well within the revised covenants of 4x. That gives some scope, if required, to add a cash top-up beyond the $117m current offer to the Cairn minorities.
Investment case needs higher prices for key commodities: Ultimately Vedanta needs higher prices to see its equity re-rate – our NPV is negative on spot, as is the company’s March-16 book value and SOTP (Figure 32). We think higher prices are likely for its two principal commodities zinc and oil (captured in our forecasts). However, until the company takes more meaningful steps to reduce debt, eliminate structural complexity and unlock ‘latent capacity’, the stock remains too risky for us so we retain our UW rating."

Goldman Sachs today initiates coverage of Vedanta Resources PLC (LON:VED) with a neutral investment rating and price target of 400p.

We initiate on Vedanta with a Neutral rating and a 12-month price target of 400p. Vedanta has a portfolio of attractive assets (zinc/power/oil). However, the key challenge remains significant debt pressure – exacerbated by recent lower commodity prices. The company has c.US$1.3 bn/year of maturities over the next 4 years – for which we estimate FCF generation and cash at subsidiaries is sufficient. However, if commodity prices slide further or if the company faces issues in upstreaming cash from its subsidiaries (particularly Cairn and Hindustan Zinc) it could entail fund raising and as such hamper the investment case.

Citigroup note today:
"A difficult equity story to sell
Group structure complexity and high leverage still dominate Vedanta’s investment case and equally act as deterrents to a number of investors. We see four things that could turn the dial for Vedanta (group structure simplification, deleverage, KCM delivery and integrated aluminium business), but the road to delivery of all of these looks long and bumpy. Following a period of restriction, we resume coverage at Neutral/High Risk with a £4.40 TP.

It can’t ever be that simple
A big minority line from Vedanta Ltd will always remain even if the group manages to buy all other minorities. Moreover, investors with a global mandate have an option to avoid the holding company debt/discount and KCM/Zambia risk, meaning that the group risks competing for capital/investors with its own subsidiaries. Moreover, valuation disconnects between the holding and subsidiary companies can increase the vulnerability of the higher-rated name as investors try to tap into arbitrage opportunities.

What changes with Cairn merger?
Due to completion timing uncertainty, dominant minority shareholding and reversal of the bid premium, we don’t factor the proposed Cairn India merger into our base case. We estimate a merger on current terms would reduce VED’s earnings and NPV by a double-digit % as the gain from higher effective ownership of Cairn India (from 37.7% to 50.1%) would be more than offset by lower effective ownership of all other businesses under VED Ltd as Plc’s stake would be diluted to 50.1% (from 62.9% currently) under current merger terms.

Key changes to our model
We update our model for the FY16 results and also incorporate Citi’s current commodity and fx estimates. Significantly lower commodity prices since our last publication have resulted in double-digit downgrades to our EPS estimates from FY18 onwards while our FY17 EPS estimate has turned to a negative 52.6c from +48.4c previously due to a lower base. Our NPV has, however, declined only marginally to £16.2/share from £16.7/share due to roll-forward. Our price target (based on NPV and EV/EBITDA valuation methods) declines to £4.40/share from £5.50/share, primarily on significantly lower EBITDA."

Credit Suisse today reaffirms its underperform investment rating on Vedanta Resources PLC (LON:VED) and raised its price target to 300p (from 250p).

Deutsche Bank today upgrades its investment rating on Vedanta Resources PLC (LON:VED) to buy (from hold) and raised its price target to 615p (from 375p).

Credit Suisse today reaffirms its underperform investment rating on Vedanta Resources PLC (LON:VED) and raised its price target to 330p (from 300p).

StockMarketWire.com
Vedanta's Q1 EBITDA has dived 45% to $119.2m, from $219.4m, with revenue down 32% to $281.5m, from $413.0m.

"We have made good progress on the ramp up of capacities at our Aluminium, Power and Iron Ore businesses during the quarter," said CEO Tom Albanese.

"These would be significant contributors to earnings as the year progresses. Zinc-India was impacted by lower mined metal production as per the mine plan, and the second half is expected to be substantially higher.

"We are making good progress towards optimising costs at Copper-Zambia. We are focused on generating stronger free cash flow and de-levering the balance sheet, in line with our strategic priorities.

"Another of these priorities, the simplification of the group structure, is also on track following the recent announcement of the revised and final terms for the Vedanta Ltd-Cairn India merger."

HIGHLIGHTS:
- Oil and Gas: production stable; contribution from Mangala EOR, world's largest polymer EOR program, increased to 42kboepd

- Rajasthan water flood opex at $4.4/boe, blended cost at $6.4/boe

- Silver production up 20% y-o-y

- Lower mined metal production as per plan, H2 production expected to be substantially higher than H1

- Maintained first decile cost of production

- Copper Zambia: Konkola underground production up 2% y-o-y due to improved equipment availability; overall cost of production 8% lower

- Aluminium: Exit production run-rate of 1.1mtpa

- Ramp-up of first line of 1.25mt Jharsuguda-II smelter completed, second line commenced in July; 325kt BALCO-II smelter nearing completion

- Iron ore: Production at Goa ramped up; produced 40% of allocated annual capacity at Goa in Q1

- TSPL: Two units operated at 72% availability, third unit to be capitalized in Q2

- BALCO: Second 300 MW IPP unit capitalized

Jefferies International today reaffirms its underperform investment rating on Vedanta Resources PLC (LON:VED) and raised its price target to 400p (from 350p).

Consolidated Results for the Second Quarter ended 30 September 2016
Mumbai, India: Vedanta Limited today announced its unaudited consolidated results under Ind AS for the second financial quarter (Q2) ended 30 September 2016.

Financial Highlights
· Revenues of Rs. 15,666 crore, up 9% q-o-q
· EBITDA of Rs. 4,640 crore up by 31% q-o-q, driven by strong operating performance and higher commodity prices
· Robust EBITDA margin1 of 39% vs. 32% in the previous quarter
· Attributable PAT at Rs. 1,252 crore, 17% higher y-o-y and 104% higher q-o-q
· Delivered cumulative cost and marketing savings of $ 421 mn over the last eighteen months
· Free cash flow post growth capex of Rs. 2,613 crore driven by operating performance and working capital initiatives
· Net debt reduced by Rs. 2,259 crore
· Strong financial position with total cash and liquid investments of Rs. 54,833 crore
· Contribution of c. Rs. 13,000 crore to the Indian Exchequer during H1 FY2017, in the form of taxes, duties, royalties and profit petroleum
· Interim dividend of Rs. 1.75 per share

Operational Highlights
· Aluminium: Smelters continue to ramp-up, production run-rate of 1.1mtpa (excluding trial run) and 1.2mtpa (including trial run)
· Power: TSPL 3rd unit of 660MW capitalized; plant availability at 77%
· Zinc India: Mined metal production up 51% q-o-q, H2 expected to be significantly higher than H1 as per the mine plans
· O&G: Strong production at Rajasthan, Mangala EOR 24% higher q-o-q; blended cost down 10% q-o-q
· Iron ore: Mining and shipments from Goa resumed post monsoon

1. Excludes custom smelting at Copper India and Zinc India operations

Tom Albanese, Chief Executive Officer, Vedanta Limited, said: "We have made significant operational progress this quarter, with an increase in production from Zinc India quarter-on- quarter, good operating performance at our Oil & Gas business, the TSPL Power business now fully operational and Aluminium continuing to ramp-up. During the quarter, as a result of our improved operating performance and working capital initiatives, we maximised free cash flow. We have substantially reduced our debt and remain focused on strengthening our balance sheet, including by refinancing debt maturities. Simplifying the group structure continues to be a priority, and the Cairn India - Vedanta Limited merger remains on track for completion in Q1 CY2017, supported by the shareholders of both companies."

Nice chart Harry.

The recent notes seem at odds.

24 Oct Barclays Capital Underweight 709.00 460.00 460.00 Reiterates
14 Oct Jefferies International Underperform 709.00 400.00 500.00 Reiterates
14 Oct Credit Suisse Neutral 709.00 330.00 330.00 Upgrades
11 Oct Deutsche Bank Buy 709.00 670.00 670.00 Reiterates

Nearly all of the miners have done well (doubled or trebled) since Jan 2016 and almost none of the brokers have been confident enough to classify them as a buy and even if a few have, they have set TP well below the actual sp.

StockMarketWire.com
Vedanta Resources has booked H1 revenue of $4.9bn and EBITDA of $1.2bn, down respectively 15% and 4% on the year mostly due to lower commodity prices and lower volumes at Zinc India in line with mine plans.

"Vedanta Resources continues to deliver on all fronts, achieving robust operational and financial performance in the first half of the financial year," said chairman Anil Agarwal in a statement.

"We ramped-up production as planned at our Aluminium, Power and Iron Ore businesses. We continue our relentless focus on cost optimisation, generating strong free cash flow and de-levering our balance sheet.

"During H1, we received approval from all sets of shareholders for the merger of Cairn India with Vedanta Limited. This is a significant step towards simplifying the group, and creating long-term shareholder value, in line with our strategic priorities.

"Vedanta's exposure to India means we are well-positioned to benefit from world's fastest growing economy."

HIGHLIGHTS:
- Highest EBITDA margin (excluding custom Smelting)(2) in the last two years of 33% compared to 30% last year, driven by lower costs

- Higher operating Profit of US$720 million (H1 FY2016: US$578 million)

- Underlying Loss Per Share(3) of 18.8 US cents (H1 FY2016: loss of 57.6 US cents) and Basic Loss Per Share of 23.2 US cents (H1 FY2016: loss of 117.7 US cents), reflecting benefits of cost optimisation

- Positive free cash flow after growth capex(4) of US$166 million

- Gross debt reduced by US$118 million over one year

- Net debt increased to US$8.2 billion, due to special dividend payment by Hindustan Zinc Limited in April 2016

- Positive credit rating movements: Moody's upgraded corporate family rating from B2 to B1 and S&P revised outlook from Stable to Positive

- Interim dividend of US cents 20 per share

- Vedanta Ltd-Cairn India merger approved by shareholders; expected to complete in Q1 CY2017.

Jefferies International today upgrades its investment rating on Vedanta Resources PLC (LON:VED) to hold (from underperform) and raised its price target to 800p (from 500p)

Waiting for a pull back to 50dma

Credit Suisse today downgrades its investment rating on Vedanta Resources PLC (LON:VED) to underperform (from neutral) and raised its price target to 670p (from 600p)

Deutsche Bank today reaffirms its hold investment rating on Vedanta Resources PLC (LON:VED) and raised its price target to 905p (from 900p)

Credit Suisse today (07/12/16) reaffirms its underperform investment rating on Vedanta Resources PLC (LON:VED) and raised its price target to 750p (from 670p).

Jefferies International today (20/12/16) reaffirms its hold investment rating on Vedanta Resources PLC (LON:VED) and raised its price target to 950p (from 800p).

Q3 Highlights
Operations
· Zinc India:
§ Mined metal production up 44% q-o-q in line with mine plan
§ Integrated metal production increased q-o-q: zinc 38%, lead 26% and silver 10%
§ Environment clearances received for expansion of Zawar and Sindesar Khurd mines
· Aluminium:
§ Continued ramp up of Jharsuguda-II and BALCO-II smelters; third line of the 1.25 mtpa Jharsuguda-II smelter commenced ramp up in December 2016
§ Supply of coal has commenced from the 6mtpa coal linkages secured earlier this year
· Power:
§ 1,980MW TSPL plant fully operational with 77% plant availability
· Oil & Gas:
Rajasthan production impacted by planned shutdown; strong performance from Mangala EOR with production level of 55,000 barrels per day despite shutdown
· Iron Ore:
§ Expected to achieve annual mining cap at Karnataka and Goa in the current month; received additional mining allocation in Goa for FY 2017
Corporate

· Vedanta Limited - Cairn India merger approved by all sets of shareholders; expected to complete by Q1 CY2017

Tom Albanese, Chief Executive Officer, Vedanta Limited, said: "We have made substantial operational progress during the quarter with the enhancement of production from Zinc India and the ramp up of our Aluminium capacities. The 1,980 MW TSPL power plant continues to operate at a high availability of 77%. In our Oil and Gas business, the EOR program at the Mangala oil field in Rajasthan continued to yield positive results. We are very excited about our Gamsberg Zinc project in South Africa where pre-stripping is well underway and first ore is expected in mid CY2018. We will continue our sustained focus on costs alongside rising capacity utilizations thus driving free cash flow growth."

Mumbai, India: Vedanta Limited today announced its unaudited consolidated results under Ind AS for the third quarter (Q3) ended 31 December 2016.

Financial Highlights
· Revenues of Rs. 19,320 crore, up 23% q-o-q
· EBITDA of Rs. 6,002 crore, up 29% q-o-q and up 83% y-o-y
· Robust EBITDA margins1 of 39%, reflecting benefits from higher commodity prices and volume ramp-up
· Attributable PAT at Rs. 1,866 crore, up 4.5 times y-o-y and 49% higher q-o-q
· Delivered cumulative cost and marketing savings of $545 mn over the last 7 quarters, ahead of plan to deliver $1.3 bn in four years
· Free cash flow of Rs. 1,801 crore, driven by strong operating performance
· Gross debt reduction of Rs. 1,828 crore and net debt reduction of Rs. 447 crore during the quarter
· Strong financial position with total cash and liquid investments of Rs. 53,452 crore

Operational Highlights
· Zinc India: Mined metal production up 44% q-o-q in line with mine plans; environment clearances received for expansion of Zawar and Sindesar Khurd mines
· Aluminium: Smelters continue to ramp-up; third line of the 1.25 mtpa Jharsuguda-II smelter commenced ramp up in December 2016
· Power: 1,980MW TSPL plant availability at 77%
· Oil & Gas: Mangala EOR production at 55 kboepd; Rajasthan production impacted by planned shutdown
· Iron ore: Achieved annual mining production cap in January; received additional mining allocation in Goa for FY2017
1. Excludes custom smelting at Copper India and Zinc India operations

Tom Albanese, Chief Executive Officer, Vedanta Limited, said: "Volume ramp-up and cost efficiencies across our operations, aided by higher commodity prices, have significantly driven up EBITDA y-o-y. Our financial position remains robust and we continue to strengthen our balance sheet by maximising free cash flow and reducing debt. With our focus on simplifying the group structure, the Vedanta Limited and Cairn India merger is expected to be completed in the first quarter of CY 2017."