Research firm Geojit Investments has upgraded Vedanta Ltd to a BUY rating, setting a revised target price of Rs 485 per share. The recommendation comes on the back of robust domestic demand, operational efficiencies, and strategic expansions amidst a challenging commodity price environment and volatile global trade conditions. Despite a moderate Q1FY26 performance impacted by margin contractions and rising costs, Vedanta’s diversified business portfolio across metals, mining, oil, gas, and power positions it well for growth. The company’s disciplined capital management and progress on key projects reinforce the positive outlook for investors.

Strong Revenue Growth Driven by Domestic Demand and Market Premiums

Vedanta reported a 6.2% year-on-year increase in consolidated revenue from operations to Rs. 37,434 crore in Q1FY26. This growth stemmed primarily from robust domestic demand and elevated market premiums, which compensated for subdued commodity prices. The aluminium segment led with revenues rising 7.7% YoY to Rs. 14,556 crore, fueled by a 17% increase in domestic sales totaling 313 kilotonnes (KT). Total aluminium production inched up 1.5% YoY, reaching 605 KT.

Conversely, the India zinc and lead business experienced a 4.8% revenue decline to Rs. 6,116 crore, notwithstanding hitting a record quarterly mined metal output of 265 KT. The international zinc business boasted a striking 52.7% revenue surge to Rs. 1,150 crore, aided by a 74% jump in Gamsberg mine production, underpinned by improved ore availability and mining ramp-up.

Operational Margins Under Pressure but Overall Profitability Maintained

The quarter’s earnings before interest, taxes, depreciation, and amortization (EBITDA) slightly dipped by 0.3% YoY to Rs. 9,918 crore, mainly attributable to a steep 20% rise in material costs. This cost inflation compressed the EBITDA margin by 170 basis points to 26.5%. Reported profit after tax (PAT) dropped 12.5% YoY to Rs. 4,457 crore, largely driven by a near doubling (92.1% increase) of tax expenses.

Despite margin pressures, Vedanta’s earnings reflect operational discipline and efficiency against a backdrop of headwinds. Adjusted PAT declined 11.7% YoY to Rs. 3,185 crore with an adjusted earnings per share (EPS) of Rs. 8.2, down 16.2% from the previous year’s quarter.

Capex, Expansion Plans, and Production Outlook

The company continues to invest aggressively, particularly in Hindustan Zinc’s Phase 1 expansion plan aiming to add 250 KT capacity supported by a substantial $1.4 billion capital expenditure. This forms part of a broader strategic vision to achieve a 2 million metric tons zinc capacity.

Vedanta’s power segment is also scaling up, with 1,300 MW of new capacity slated for addition in Q2FY26. Recent commissioning in July included 350 MW at Meenakshi Unit 3 and 600 MW at Athena Unit 1, with further capacity launches planned throughout the quarter and fiscal year.

Alumina production is on track to cross 3 million metric tonnes in FY26. The Gamsberg Phase 2 zinc project is nearing completion at 80%, gearing up to contribute approximately 4 million tons of run-of-mine ore and 200,000 tons of zinc output annually. Oil & gas division guidance remains steady with planned production of 95,000 to 100,000 barrels of oil equivalent per day for FY26.

Financial Ratios and Market Position

Vedanta’s market capitalization stands at Rs. 168,227 crore with an enterprise value of Rs. 251,610 crore. The stock trades at a trailing P/E multiple of 13.8x (FY25 basis) and is expected to compress to 10.1x in FY26 and further to 8.7x in FY27, reflecting the anticipated earnings acceleration. The EV/EBITDA multiple is projected to decline from 6.2x in FY25 to 5.3x in FY26 and 4.8x in FY27. The company's return on equity (ROE) is forecasted to sustain an impressive trajectory from nearly 50% in FY25 to above 57% in FY27, highlighting strong profitability and capital efficiency.

Stock Performance and Valuation Outlook

Vedanta’s stock performance has been relatively flat over the past year, delivering an absolute return of 0.3%, slightly underperforming the Sensex benchmark by 0.8%. However, the recent upgrade with a BUY rating accompanied by a revised target price of Rs. 485 implies a potential upside of approximately 13% from the current market price of Rs. 430.

The stock is classified as a large-cap liquidity name with a free float of 43.3%, making it accessible for institutional and retail investors alike. The dividend yield stands attractively at 8.3%, adding an income element to the growth story.

Concluding Observations for Investors

Vedanta’s diversified commodity exposure and solid domestic demand underpin stable revenue growth despite global volatility.

Cost pressures, particularly in raw materials, have compressed near-term margins but are expected to normalize with operational scaling and efficiency gains.

Strategic expansions in zinc capacity and incremental power generation capacity enhance future production capabilities.

Strong balance sheet metrics, prudent capital allocation, and improving profitability ratios position the company favorably for sustainable earnings growth.

Current valuations offer a compelling risk-reward proposition given earnings growth visibility and dividend yield.

In summary, Geojit Investments’ BUY call on Vedanta with a target price of Rs. 485 reflects confidence in the company’s ability to navigate cyclical challenges and capitalize on growth opportunities in metals and energy sectors. Investors seeking stable large-cap exposure with growth and dividend upside would find this a noteworthy inclusion in their portfolio.