Hindustan Zinc Ltd. share price target

Hindustan Zinc (HZ)'s 3QFY21 results were strong, as expected, with EBITDA up 43% YoY on higher volumes and prices. While silver business remained strong with EBIT of INR10.1b (37% of total), zinc realized premiums recovered to pre-COVID levels as the share of domestic volumes improved in 3Q. As major projects near completion, we expect 9% CAGR in HZ volumes over FY21-23E, driving an 18% CAGR in EBITDA. However, we believe this growth is factored in the current valuation and hence we rate it Neutral....

Registered Office:Rukmini Towers, 3rd& 4th Floor, # 3/1, Platform Road, Sheshadripuram, Bangalore - 560 020,...

Registered Office:Rukmini Towers, 3rd& 4th Floor, # 3/1, Platform Road, Sheshadripuram, Bangalore - 560 020,...

In Q1FY21, standalone revenue fell 20.8% YoY to Rs. 3,898cr, mainly due to weaker revenue from Zinc (-27.0% YoY, 65.7% of total revenue) and Lead (-11.7% YoY, 15.5% of total revenue). The drop in revenue was attributable to reduced prices (Zinc LME: -29.0% YoY and Lead LME: -11.2%YoY), lower volumes (impacted by the COVID-19 pandemic) and shrunk premiums (due to adverse domestic-export mix), partly offset by rupee depreciation. Mined metal production dropped 5.2% YoY to 202kt owing to outage in April during the lockdown. Saleable Silver production decreased to 117mt (-26.4% YoY) due to delayed stabilization of DSC lead smelter and increase in WIP,...

Hindustan Zinc (HZ) reported earnings in line with ours/consensus estimates. HZ missed its guidance on volumes and ore grade over past couple of years due to delay in commissioning of shafts and weaker than assessed ore grade. As the new shafts at both Rampura Agucha (RA) and Sindesar Khurd (SK) mines commenced hauling of ore, we expect significant improvement in quality of operations with better visibility on production and lower costs. In last five years since FY15, ore grade has fallen by ~30% to 7.5% due to fall in...

21 July 2020 Revenue declined 9% QoQ (-20% YoY) to INR39.9b (v/s est. INR37.8b), primarily due to decline in volumes (208kt, -6% QoQ), Zinc LME (-8% QoQ) and premiums offset by currency depreciation (5%). Hindustan Zincs (HZ) 1QFY21 results reflect impact of the COVID-19 led shutdown, lower LME and adverse sales mix (higher exports). EBITDA was down 14% QoQ to INR15.8b (6% higher than est.), aided by lower costs. However, PAT inched up 1% QoQ to INR13.6b on higher other income (v/s est. We expect HZs EBITDA at 11% CAGR over FY20-22E despite lower LME, primarily on ~10% volume CAGR to 1,034kt. Maintain Derived Zinc realizations declined 11% QoQ to USD2,070/t (v/s 8% decline in LME zinc) due to lower realized premiums, which in turn was on account of higher exports (70% of volumes v/s normal level of 25%).

On account of Covid-19, the company halted operations from March 22, 2020 and gradually restarted operations from April 8, 2020. All mines and smelters of HZL were operational in a couple of weeks. In April 2020, HZL's mines and smelter were ramped up to 40% and 80% of capacity,...