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Vedanta jumps 5% after Credit Suisse initiates coverage with Outperform, sees 21% upside

December 15
16:05 2017
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Vedanta shares rallied more than 5 percent intraday Friday after global investment firm Credit Suisse has initiated coverage with an outperform rating on the stock as it is a leveraged play on aluminium.

The target price is set at Rs 345 per share, implying potential upside of 21.2 percent over Thursday’s closing price.

The research house said aluminium business is most important for incremental profits. Global supply-demand and surging raw material prices bodes well for aluminium, it added.

On zinc, Credit Suisse said prices have peaked and despite planned volume growth, Hindustan Zinc is fully valued. Much of the ex-Hindustan Zinc upside is purely execution-dependent.

Vedanta is not expensive even after adjusting for Hindustan Zinc but volume projections are below company guidance, which remains risk to rating, it feels.

Meanwhile, the research house has also initiate coverage with neutral on Hindustan Zin and set a target price at Rs 325 per share as the stock price is fully valued despite planned volume growth.

Even after recent decline in stock price, Hindustan Zinc traded significantly higher, it feels. In bull case, it expects the stock to hit Rs 380 per share assuming higher commodity prices, Credit Suisse said.

The company has been expanding volume & on target to achieve 1.2 mt mined metal production by FY20. Credit Suisse feels EBITDA per tonne is likely to stay healthy and expects decent free-cash-flow generation.

The research house expects cost moderation as it shifts to 100 percent underground mining.

At 14:48 hours IST, the stock price was quoting at Rs 298.35, up Rs 13.70, or 4.81 percent and Hindustan Copper was at Rs 91.70, up 0.66 percent on the BSE.

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