Credit Suisse slashes target price on Vedanta
Following guidance last week from Cairn India that it is aiming to remain free-cash-flow positive at current spot prices for crude analysts at Credit Suisse have cut their price target on Vedanta Resources to 500p form 900p.
FTSE 250
19,450.67
17:14 18/04/24
FTSE 350
4,334.00
17:14 18/04/24
FTSE All-Share
4,290.02
16:54 18/04/24
Mining
10,662.18
17:14 18/04/24
Vedanta Resources
832.60p
16:35 28/09/18
The main concern of the Swiss broker is the company’s key debt covenant of 2.75 times’ net debt to operating profits (EBITDA).
However, Vedanta should remain comfortably within the above at a ratio of between 2.2 and 2.3, says Credit Suisse.
Should crude pricing remain depressed at spot levels then the risk of breaching those covenants, towards the end of fiscal year 2016, would become a possibility.
Nonetheless, Credit Suisse added: “should prices remain low we would expect additional reductions in capital expenditures, which would provide a buffer.”
Despite all of the above, analyst L.Fitzpatrick maintained his neutral recommendation on the stock on the heels of the recent deep fall in the shares.