Vedanta to announce Q3 result today; here are key factors to watch out for

At the operating level, EBITDA during the quarter is expected to decline 9-17 percent compared to the year-ago period

Mining company Vedanta's third-quarter earnings are expected to be weak dented by fall in prices of base metals. Brokerages largely expect a sharp decline in profit, revenue as well as operating income, but sequentially, bottom line and EBITDA may be higher.

The stock saw a steep fall during the quarter as well as last calendar year. It lost 13 percent in Q3FY19 and plunged 39 percent in 2018 due to weak base metals prices and partial closure of Sterlite Copper smelting plant in Tuticorin.

Brokerages largely expect 10-50 percent on-year decline in profitability, dented by weak operating income and lower revenue growth.

"Lower LME prices across the board YoY will drag down realizations across the product segments. Goa mines remain non-operational, while the copper smelter at Tuticorin also remains shut. Thus, the profitability should be driven by zinc and oil & gas business. On the oil & gas front, we expect Cairn to report 117 bopd production, which is flat on QoQ basis," said Emkay which expects profit to fall 10.7 percent in profit YoY.

ICICI Securities said the decline in prices of major base metals is likely to weigh on Vedanta's Q3FY19 performance. "However, on a YoY basis, the weakness in the rupee is likely to provide marginal relief."

The revenue from operations is likely to drop in the range of 4-14 percent. ICICI Securities, as well as Edelweiss, expect top line to decline around 14 percent each YoY.

At the operating level, EBITDA (earnings before interest, tax, depreciation, and amortization) during the quarter is expected to decline 9-17 percent compared to the year-ago period.

"EBITDA is expected to decline 14.4 percent YoY. The EBITDA margin is likely to remain flattish YoY (27.7 percent in Q3FY19 versus 27.8 percent in Q3FY18)," ICICI Securities said.

According to Edelweiss Securities, EBITDA is expected to be lower by 17 percent YoY owing to lower LME prices, copper division closure and higher cost.

Zinc-International expected to deliver another quarter of subdued performance owing to higher cost and lower realization, said the research house which expects higher other income owing to the dividend from Hindustan Zinc.

But sequentially, Kotak Securities expects an increase in EBITDA due to (1) higher EBITDA at Hindustan Zinc aided by higher volumes, zinc prices and (2) increase in Zinc International EBITDA from higher volumes from existing mines and ramp-up of Gamsberg mine.

It further expects sequentially (1) iron ore EBITDA to increase on higher Karnataka volumes post monsoons. "We estimate EBITDA to decline QoQ for (1) oil & gas operations, and (2) aluminum operations due to lower aluminum prices.

Key issues to watch out for

> Progress on the ramp-up of 1.25 mtpa smelter.

> Movement in base metal prices

Disclaimer:- The views and investment tips expressed by investment experts are their own. Ripples Advisory advises users to check with certified experts before taking any investment decisions.

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