Intrinsic value of Vedanta ADR - VEDL

Previous Close

$18.28

  Intrinsic Value

$1.66

stock screener

  Rating & Target

str. sell

-91%

Previous close

$18.28

 
Intrinsic value

$1.66

 
Up/down potential

-91%

 
Rating

str. sell

We calculate the intrinsic value of VEDL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 17.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -12.83
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  9,574
  9,765
  9,990
  10,247
  10,535
  10,854
  11,205
  11,587
  12,000
  12,445
  12,922
  13,433
  13,978
  14,559
  15,176
  15,830
  16,524
  17,258
  18,035
  18,856
  19,722
  20,636
  21,600
  22,616
  23,687
  24,815
  26,002
  27,252
  28,567
  29,950
  31,405
Variable operating expenses, $m
 
  12,920
  13,217
  13,557
  13,938
  14,360
  14,824
  15,329
  15,875
  16,464
  17,096
  17,772
  18,493
  19,261
  20,077
  20,944
  21,861
  22,833
  23,860
  24,946
  26,092
  27,302
  28,577
  29,921
  31,338
  32,830
  34,401
  36,054
  37,794
  39,624
  41,549
Fixed operating expenses, $m
 
  980
  1,004
  1,030
  1,055
  1,082
  1,109
  1,136
  1,165
  1,194
  1,224
  1,254
  1,286
  1,318
  1,351
  1,385
  1,419
  1,455
  1,491
  1,528
  1,567
  1,606
  1,646
  1,687
  1,729
  1,772
  1,817
  1,862
  1,909
  1,956
  2,005
Total operating expenses, $m
  13,599
  13,900
  14,221
  14,587
  14,993
  15,442
  15,933
  16,465
  17,040
  17,658
  18,320
  19,026
  19,779
  20,579
  21,428
  22,329
  23,280
  24,288
  25,351
  26,474
  27,659
  28,908
  30,223
  31,608
  33,067
  34,602
  36,218
  37,916
  39,703
  41,580
  43,554
Operating income, $m
  -4,025
  -4,134
  -4,231
  -4,339
  -4,458
  -4,588
  -4,728
  -4,879
  -5,041
  -5,214
  -5,398
  -5,593
  -5,801
  -6,020
  -6,253
  -6,498
  -6,756
  -7,029
  -7,316
  -7,619
  -7,937
  -8,271
  -8,623
  -8,992
  -9,380
  -9,788
  -10,215
  -10,664
  -11,136
  -11,630
  -12,149
EBITDA, $m
  -2,777
  -2,855
  -2,922
  -2,997
  -3,078
  -3,166
  -3,260
  -3,361
  -3,469
  -3,583
  -3,705
  -3,834
  -3,970
  -4,113
  -4,265
  -4,424
  -4,592
  -4,768
  -4,954
  -5,149
  -5,353
  -5,568
  -5,793
  -6,029
  -6,277
  -6,537
  -6,809
  -7,094
  -7,393
  -7,707
  -8,035
Interest expense (income), $m
  829
  606
  484
  517
  555
  598
  645
  697
  754
  815
  880
  951
  1,027
  1,107
  1,193
  1,284
  1,381
  1,484
  1,592
  1,707
  1,829
  1,957
  2,092
  2,235
  2,385
  2,543
  2,710
  2,886
  3,070
  3,265
  3,469
Earnings before tax, $m
  -4,258
  -4,740
  -4,715
  -4,857
  -5,013
  -5,186
  -5,373
  -5,576
  -5,794
  -6,028
  -6,278
  -6,544
  -6,827
  -7,128
  -7,446
  -7,782
  -8,138
  -8,513
  -8,909
  -9,326
  -9,765
  -10,228
  -10,715
  -11,227
  -11,765
  -12,331
  -12,925
  -13,550
  -14,206
  -14,895
  -15,619
Tax expense, $m
  -1,543
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -1,874
  -4,740
  -4,715
  -4,857
  -5,013
  -5,186
  -5,373
  -5,576
  -5,794
  -6,028
  -6,278
  -6,544
  -6,827
  -7,128
  -7,446
  -7,782
  -8,138
  -8,513
  -8,909
  -9,326
  -9,765
  -10,228
  -10,715
  -11,227
  -11,765
  -12,331
  -12,925
  -13,550
  -14,206
  -14,895
  -15,619

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  8,789
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  27,986
  19,570
  20,020
  20,535
  21,112
  21,752
  22,455
  23,219
  24,047
  24,939
  25,896
  26,920
  28,013
  29,176
  30,412
  31,724
  33,114
  34,586
  36,142
  37,787
  39,523
  41,355
  43,287
  45,323
  47,469
  49,729
  52,108
  54,613
  57,248
  60,020
  62,937
Adjusted assets (=assets-cash), $m
  19,197
  19,570
  20,020
  20,535
  21,112
  21,752
  22,455
  23,219
  24,047
  24,939
  25,896
  26,920
  28,013
  29,176
  30,412
  31,724
  33,114
  34,586
  36,142
  37,787
  39,523
  41,355
  43,287
  45,323
  47,469
  49,729
  52,108
  54,613
  57,248
  60,020
  62,937
Revenue / Adjusted assets
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
Average production assets, $m
  7,528
  7,676
  7,852
  8,054
  8,281
  8,532
  8,807
  9,107
  9,432
  9,781
  10,157
  10,558
  10,987
  11,443
  11,928
  12,443
  12,988
  13,565
  14,176
  14,820
  15,501
  16,220
  16,978
  17,776
  18,618
  19,504
  20,438
  21,420
  22,453
  23,541
  24,685
Working capital, $m
  3,192
  -2,920
  -2,987
  -3,064
  -3,150
  -3,245
  -3,350
  -3,464
  -3,588
  -3,721
  -3,864
  -4,017
  -4,180
  -4,353
  -4,538
  -4,733
  -4,941
  -5,160
  -5,392
  -5,638
  -5,897
  -6,170
  -6,458
  -6,762
  -7,082
  -7,420
  -7,775
  -8,148
  -8,541
  -8,955
  -9,390
Total debt, $m
  10,122
  5,905
  6,310
  6,773
  7,293
  7,869
  8,501
  9,190
  9,935
  10,737
  11,599
  12,520
  13,503
  14,550
  15,663
  16,844
  18,095
  19,419
  20,820
  22,300
  23,863
  25,511
  27,250
  29,083
  31,014
  33,048
  35,189
  37,443
  39,815
  42,310
  44,935
Total liabilities, $m
  21,830
  17,613
  18,018
  18,481
  19,001
  19,577
  20,209
  20,898
  21,643
  22,445
  23,307
  24,228
  25,211
  26,258
  27,371
  28,552
  29,803
  31,127
  32,528
  34,008
  35,571
  37,219
  38,958
  40,791
  42,722
  44,756
  46,897
  49,151
  51,523
  54,018
  56,643
Total equity, $m
  6,156
  1,957
  2,002
  2,053
  2,111
  2,175
  2,245
  2,322
  2,405
  2,494
  2,590
  2,692
  2,801
  2,918
  3,041
  3,172
  3,311
  3,459
  3,614
  3,779
  3,952
  4,135
  4,329
  4,532
  4,747
  4,973
  5,211
  5,461
  5,725
  6,002
  6,294
Total liabilities and equity, $m
  27,986
  19,570
  20,020
  20,534
  21,112
  21,752
  22,454
  23,220
  24,048
  24,939
  25,897
  26,920
  28,012
  29,176
  30,412
  31,724
  33,114
  34,586
  36,142
  37,787
  39,523
  41,354
  43,287
  45,323
  47,469
  49,729
  52,108
  54,612
  57,248
  60,020
  62,937
Debt-to-equity ratio
  1.644
  3.020
  3.150
  3.300
  3.450
  3.620
  3.790
  3.960
  4.130
  4.310
  4.480
  4.650
  4.820
  4.990
  5.150
  5.310
  5.460
  5.610
  5.760
  5.900
  6.040
  6.170
  6.300
  6.420
  6.530
  6.650
  6.750
  6.860
  6.950
  7.050
  7.140
Adjusted equity ratio
  0.005
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,874
  -4,740
  -4,715
  -4,857
  -5,013
  -5,186
  -5,373
  -5,576
  -5,794
  -6,028
  -6,278
  -6,544
  -6,827
  -7,128
  -7,446
  -7,782
  -8,138
  -8,513
  -8,909
  -9,326
  -9,765
  -10,228
  -10,715
  -11,227
  -11,765
  -12,331
  -12,925
  -13,550
  -14,206
  -14,895
  -15,619
Depreciation, amort., depletion, $m
  1,248
  1,279
  1,309
  1,342
  1,380
  1,422
  1,468
  1,518
  1,572
  1,630
  1,693
  1,760
  1,831
  1,907
  1,988
  2,074
  2,165
  2,261
  2,363
  2,470
  2,584
  2,703
  2,830
  2,963
  3,103
  3,251
  3,406
  3,570
  3,742
  3,923
  4,114
Funds from operations, $m
  830
  -3,461
  -3,407
  -3,514
  -3,633
  -3,764
  -3,905
  -4,058
  -4,222
  -4,398
  -4,585
  -4,785
  -4,996
  -5,220
  -5,458
  -5,708
  -5,973
  -6,252
  -6,546
  -6,856
  -7,182
  -7,525
  -7,885
  -8,264
  -8,662
  -9,080
  -9,519
  -9,980
  -10,464
  -10,972
  -11,505
Change in working capital, $m
  -777
  -57
  -67
  -77
  -86
  -95
  -105
  -114
  -124
  -133
  -143
  -153
  -163
  -174
  -184
  -196
  -207
  -220
  -232
  -245
  -259
  -273
  -288
  -304
  -320
  -337
  -355
  -374
  -393
  -414
  -435
Cash from operations, $m
  1,607
  -3,404
  -3,340
  -3,438
  -3,547
  -3,668
  -3,801
  -3,944
  -4,099
  -4,265
  -4,442
  -4,632
  -4,833
  -5,047
  -5,273
  -5,513
  -5,766
  -6,033
  -6,314
  -6,610
  -6,923
  -7,251
  -7,597
  -7,960
  -8,342
  -8,743
  -9,164
  -9,606
  -10,071
  -10,558
  -11,069
Maintenance CAPEX, $m
  0
  -1,255
  -1,279
  -1,309
  -1,342
  -1,380
  -1,422
  -1,468
  -1,518
  -1,572
  -1,630
  -1,693
  -1,760
  -1,831
  -1,907
  -1,988
  -2,074
  -2,165
  -2,261
  -2,363
  -2,470
  -2,584
  -2,703
  -2,830
  -2,963
  -3,103
  -3,251
  -3,406
  -3,570
  -3,742
  -3,923
New CAPEX, $m
  -905
  -148
  -177
  -202
  -227
  -251
  -275
  -300
  -325
  -350
  -375
  -402
  -429
  -456
  -485
  -515
  -545
  -577
  -610
  -645
  -681
  -719
  -758
  -799
  -842
  -886
  -933
  -982
  -1,034
  -1,087
  -1,144
Cash from investing activities, $m
  -638
  -1,403
  -1,456
  -1,511
  -1,569
  -1,631
  -1,697
  -1,768
  -1,843
  -1,922
  -2,005
  -2,095
  -2,189
  -2,287
  -2,392
  -2,503
  -2,619
  -2,742
  -2,871
  -3,008
  -3,151
  -3,303
  -3,461
  -3,629
  -3,805
  -3,989
  -4,184
  -4,388
  -4,604
  -4,829
  -5,067
Free cash flow, $m
  969
  -4,807
  -4,795
  -4,948
  -5,116
  -5,299
  -5,498
  -5,712
  -5,941
  -6,187
  -6,448
  -6,726
  -7,021
  -7,334
  -7,665
  -8,015
  -8,385
  -8,774
  -9,185
  -9,618
  -10,074
  -10,553
  -11,058
  -11,588
  -12,146
  -12,732
  -13,348
  -13,995
  -14,674
  -15,388
  -16,137
Issuance/(repayment) of debt, $m
  -333
  -1,487
  405
  463
  520
  576
  632
  688
  745
  803
  861
  922
  983
  1,047
  1,113
  1,181
  1,251
  1,324
  1,401
  1,480
  1,563
  1,649
  1,739
  1,833
  1,931
  2,034
  2,141
  2,254
  2,372
  2,495
  2,625
Issuance/(repurchase) of shares, $m
  0
  6,600
  4,760
  4,908
  5,071
  5,250
  5,443
  5,652
  5,877
  6,117
  6,374
  6,647
  6,937
  7,244
  7,569
  7,913
  8,277
  8,660
  9,064
  9,490
  9,939
  10,411
  10,908
  11,430
  11,979
  12,557
  13,163
  13,800
  14,470
  15,172
  15,910
Cash from financing (excl. dividends), $m  
  -529
  5,113
  5,165
  5,371
  5,591
  5,826
  6,075
  6,340
  6,622
  6,920
  7,235
  7,569
  7,920
  8,291
  8,682
  9,094
  9,528
  9,984
  10,465
  10,970
  11,502
  12,060
  12,647
  13,263
  13,910
  14,591
  15,304
  16,054
  16,842
  17,667
  18,535
Total cash flow (excl. dividends), $m
  443
  307
  370
  423
  475
  526
  578
  629
  681
  733
  787
  842
  898
  957
  1,017
  1,079
  1,143
  1,210
  1,280
  1,352
  1,428
  1,507
  1,589
  1,675
  1,764
  1,858
  1,957
  2,060
  2,167
  2,280
  2,398
Retained Cash Flow (-), $m
  2,245
  -6,600
  -4,760
  -4,908
  -5,071
  -5,250
  -5,443
  -5,652
  -5,877
  -6,117
  -6,374
  -6,647
  -6,937
  -7,244
  -7,569
  -7,913
  -8,277
  -8,660
  -9,064
  -9,490
  -9,939
  -10,411
  -10,908
  -11,430
  -11,979
  -12,557
  -13,163
  -13,800
  -14,470
  -15,172
  -15,910
Prev. year cash balance distribution, $m
 
  6,059
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -234
  -4,390
  -4,485
  -4,596
  -4,723
  -4,866
  -5,024
  -5,196
  -5,384
  -5,587
  -5,805
  -6,038
  -6,287
  -6,553
  -6,834
  -7,133
  -7,450
  -7,785
  -8,138
  -8,511
  -8,905
  -9,319
  -9,756
  -10,215
  -10,698
  -11,207
  -11,741
  -12,302
  -12,892
  -13,512
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -225
  -4,019
  -3,903
  -3,785
  -3,661
  -3,531
  -3,394
  -3,248
  -3,093
  -2,929
  -2,757
  -2,577
  -2,391
  -2,200
  -2,006
  -1,813
  -1,621
  -1,434
  -1,253
  -1,082
  -921
  -773
  -639
  -520
  -416
  -327
  -252
  -190
  -141
  -102
Current shareholders' claim on cash, %
  100
  3.9
  2.1
  1.1
  0.6
  0.3
  0.2
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Vedanta Limited is a natural resource company engaged in the business of manufacturing copper and copper products, and aluminum and aluminum products. The Company's segments include Copper, which consists of manufacturing of copper cathode, continuous cast copper rod and anode slime, including from purchased concentrate and manufacturing of precious metal from anode slime, sulfuric acid, phosphoric acid; Iron ore; Aluminium, which consists of manufacturing of alumina and various aluminum products; Power, which consists of power, including power facilities engaged in generation and sale of commercial power, and Other, which consists pig iron and metallurgical coke. Its iron ore business consists of iron ore exploration, mining, beneficiation and exports. The Company has iron ore mining operations in the States of Goa and Karnataka. Its copper business consists of custom smelting. Its power business consists of 2,400 megawatt thermal coal based power facility in the State of Odisha.

FINANCIAL RATIOS  of  Vedanta ADR (VEDL)

Valuation Ratios
P/E Ratio -28.9
Price to Sales 5.7
Price to Book 8.8
Price to Tangible Book
Price to Cash Flow 33.7
Price to Free Cash Flow 77.2
Growth Rates
Sales Growth Rate -12.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -41.7%
Cap. Spend. - 3 Yr. Gr. Rate -6.7%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 120.1%
Total Debt to Equity 164.4%
Interest Coverage -4
Management Effectiveness
Return On Assets -4.5%
Ret/ On Assets - 3 Yr. Avg. -1.9%
Return On Total Capital -10.8%
Ret/ On T. Cap. - 3 Yr. Avg. -6.4%
Return On Equity -25.7%
Return On Equity - 3 Yr. Avg. -14.6%
Asset Turnover 0.3
Profitability Ratios
Gross Margin -36.9%
Gross Margin - 3 Yr. Avg. -16.5%
EBITDA Margin -22.8%
EBITDA Margin - 3 Yr. Avg. -0.5%
Operating Margin -42%
Oper. Margin - 3 Yr. Avg. -21.7%
Pre-Tax Margin -44.5%
Pre-Tax Margin - 3 Yr. Avg. -24.5%
Net Profit Margin -19.6%
Net Profit Margin - 3 Yr. Avg. -11.6%
Effective Tax Rate 36.2%
Eff/ Tax Rate - 3 Yr. Avg. 35.6%
Payout Ratio -13.9%

VEDL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VEDL stock intrinsic value calculation we used $9574 million for the last fiscal year's total revenue generated by Vedanta ADR. The default revenue input number comes from 2016 income statement of Vedanta ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our VEDL stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for VEDL is calculated based on our internal credit rating of Vedanta ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Vedanta ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of VEDL stock the variable cost ratio is equal to 132.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $956 million in the base year in the intrinsic value calculation for VEDL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 8.2% for Vedanta ADR.

Corporate tax rate of 27% is the nominal tax rate for Vedanta ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the VEDL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for VEDL are equal to 78.6%.

Life of production assets of 6 years is the average useful life of capital assets used in Vedanta ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for VEDL is equal to -29.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6156 million for Vedanta ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 928.253 million for Vedanta ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Vedanta ADR at the current share price and the inputted number of shares is $17.0 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ ETFs with exposure to Vedanta Ltd. : November 3, 2017   [Nov-03-17 12:39PM  Capital Cube]
▶ Vedanta Sees Its Composite Rating Rise To 97   [Sep-06-17 03:00AM  Investor's Business Daily]
▶ Vedanta Will Continue to Trend Higher   [Aug-21-17 01:59PM  GuruFocus.com]
▶ ETFs with exposure to Vedanta Ltd. : July 10, 2017   [Jul-10-17 03:27PM  Capital Cube]
▶ ETFs with exposure to Vedanta Ltd. : June 27, 2017   [Jun-27-17 03:55PM  Capital Cube]
▶ Vedanta - Cairn Merger Effective   [Apr-11-17 10:39AM  PR Newswire]
▶ 10 Emerging Market Corporate Bond Picks: Embracing Risk   [Mar-07-17 11:45AM  Barrons.com]
▶ 14 Emerging Market Stocks You Should Have Owned in 2016   [Jan-03-17 12:03PM  at Barrons.com]
▶ Should You Buy Vedanta Ltd (ADR) (VEDL)?   [Dec-13-16 04:13PM  at Insider Monkey]
Financial statements of VEDL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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