Vedanta faces tough times

In the run up to the company’s fourth-quarter figures Vedanta has been hit with further costs in its African operations.

The last quarter has seen Vedanta stuck in a range between 937p-787p. The last couple of trading days has once again seen the price move to the top of that range, and correlated with the relative strength index, inferring an overbought stance.

Asian markets have raised their expectations that China will embark on some sort of stimulus package which should help drive demand higher. Although this expectation has helped equities, it has not had a similarly positive impact on commodities.

Though it is currently difficult to quantify, the announcement that Zambia’s government has rubber-stamped a 28.8% increase in electricity charges for miners will have a knock-on effect to the company’s three mines in the country.

Expectations for Vedanta’s fourth-quarter figures, expected on 10 April, are that earnings per share will fall to 0.426. The company’s operating profit is expected to fall from $2.81 billion down to $2.20 billion, with a pre-tax profit dropping to $1.32 billion.

In the run up to these figures, the shares look to be drifting back down to the bottom end of the range. A retest of the 800p level could be seen as we await improvements in demand. Only a close above the three-month high of 937p would cause us to re-evaluate the trade. 

Vedanta chart

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by analysts