Hindustan Zinc - CMP Rs.138 - 2012 Diwali Pick - Aditya Birla Money

Integrated business model: HZL's integrated business model spanning mining, smelting and captive power, helps place it in the lowest quartile of the global zinc cost curve Low operating costs along with low capex costs enables it to earn strong free cash flows even curve. during lean times and has resulted in a fortress balance sheet.

Protection from falling zinc prices: Rupee depreciation has been providing HZL strong protection from fall in international zinc prices.

Strong balance sheet: As at the end of Q2FY13, HZL had a net cash of Rs191.3bn. This translates into a net cash per share of Rs45.3 (~32.4% of current market cap)

Potential trigger: Government's stake sale in HZL to Vedanta Resources could lead to a de-listing. Given the strong asset value of HZL, the government is unlikely to sell its stake in HZL without a good premium to its CMP.

Elevated interest rates a positive too: Given substantial cash in the books, high domestic interest rates is a positive for HZL as it would lead to higher nonoperating income

Attractive Valuations: HZL trades attractively at a P/E and EV/EBITDA of 8.8x and 5.6x FY14E respectively.

Source : Equity Bulls

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