UBS sees re-rating potential at Vedanta, initiates at 'buy'
UBS has kicked off coverage of Vedanta Resources with a 'buy' rating, saying that the miner has "growth optionality and re-rating potential".
FTSE 250
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Mining
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Vedanta Resources
832.60p
16:35 28/09/18
The bank celebrated Vedanta's diversified business, with exposure to a variety of commodities - zinc, lead, silver, oil and gas, aluminium, power, copper and iron ore - and a portfolio of assets across India, southern Africa, Ireland and Australia.
"It has faced challenges related to operating in India, its complicated holding structure, and leveraged balance sheet making it one of the riskier names in the sector. However, we find the stock attractive and see re-rating potential over the next 12 months," UBS said.
The positive view is due to the miner's favourable commodity mix (with oil, zinc and copper accounting for nearly four-fifths of operating profits), sector-leading production growth, potentially positive regulatory catalysts (backdrop is improving in India) and the likelihood of a near-term debt refinancing.
UBS set an 840p target price for the shares, but said it sees upped to 1,999p in its blue-sky scenario.
In spite of the positive comments, the stock was down 1.9% at 620.5p.