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Vedanta's reputation for industry-leading project management was solidified with these results. The Indian-focused diversified miner's Jharsuguda aluminium smelter will produce its first metal in mid-2008 - a full year ahead of schedule. Its Chanderoya zinc smelter expansion will also be commissioned three months early.
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But Vedanta remains frustrated by one key event beyond its own control. It is still waiting for the Indian Supreme Court to grant environmental permits for its Lanjigarh bauxite mines. If it can secure more of its own local bauxite supplies, rather than importing from Australia and Guinea, Vedanta can produce aluminium at a fraction of the cost of newer Middle-Eastern rivals.
There's a risk the softening zinc price might pare back earnings growth, and Vedanta's margins remain vulnerable to greater reduction in India's protective domestic tariffs. A lack of news on consolidation of its HZL and Balco holdings is frustrating, but more progress is expected by the end of the year.
Citi expects adjusted earnings of 321c in 2008 and 461c in 2009 (327c in 2007).
Vedanta Resources (VED) |
||||
|---|---|---|---|---|
| ORD PRICE: | 1,990p | MARKET VALUE: | £ 5,729m | |
| TOUCH: | 1,990-1,992p | 12-MONTH HIGH: | 2,317p | LOW: 1,091p |
| DIVIDEND YIELD: | 0.9% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 127¢* | NET CASH: | $2.28bn | |
| Half-year to 30 Sep | Turnover ($bn) | Pretax profit ($bn) | Earnings per share (¢) | Net div per share (¢) |
|---|---|---|---|---|
| 2006 | 3.00 | 1.17 | 156 | 15.0 |
| 2007 | 3.89 | 1.31 | 162 | 16.5 |
| % change | +29 | +13 | +4 | +10 |
Ex-div:05 Dec Payment:17 Jan *$2.05=£1 |
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Click here for a guide to the terms used in IC results tables.
Vedanta is a tight ship and, while news on some key issues would be welcome, these should eventually counteract any short-term zinc-related weakness. Having risen 63 per cent since last year's buy recommendation (1,225p, 24 November 2006), Vedanta's shares still look long-term good value.
Last IC View: Buy, 1,415p, 16 May 2007
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
