More on Vedanta
Vedanta: 2005/6 results
Higher commodity prices improved Indian miner Vedanta’s EBITDA margin 5.7 percentage points to 29.8%. Higher prices and the first full year contribution from a major acquisition last year doubled revenues.
Like any miner, the key driver is commodity prices. Although Vedanta’s markets are different from those of other London listed miners (it sells most of its aluminium and zinc in India and its copper elsewhere in Asia) this is becoming less important.
The outlook for prices over the next few years is less positive, with consensus expectations of a gradual decline. However some commodity analysts are more positive and expect further rises. Much depends on the view one takes of the outlook for the global economy, particularly with so much of the demand for base metals coming from Asia.
Vedanta is looking distinctly cheap against both the sector and the market on a historical PE of 10×, although the yield is only 2.5%. Although there we expect gradual reduction in metal prices in the short term (and commodity prices rarely do well in the long term) the rating leaves room for this. We also expect some acquisitive growth.
Random picks: Aviva | Body Shop | Collins Stewart | GUS | Liberty International | National Grid | Rotork | VT Group | Viridian | Resolution