Hindustan Zinc - 3QFY2016 Result Update - Angel Broking

For 3QFY2016, Hindustan Zinc (HZL) reported a 11% yoy decline in revenue to Rs. 3,385cr, in line with estimates, led by a 17% decline in zinc revenues as higher volumes and rupee depreciation benefits were offset by lower realizations on account of a decline in LME prices and zinc premiums. Mined metal production declined 13% yoy to 2,40,000MT. EBITDA for the quarter was also in line with expectation at Rs. 1,478cr, declining 29% yoy, led by lower LME prices and Rs. 84cr contribution towards the District Mineral Foundation (DMF). While depreciation and finance expenses came in line with our expectations, lower tax rate resulted in the net profit coming in 9% ahead of expectations at Rs. 1,811cr.

Management has maintained its guidance of a ~16% increase in refined metal production volume for FY2016, despite a weaker mine plan in 4QFY2016. Management also indicated that the expansion projects remain on track, which should help drive volumes.

Outlook and valuation: We expect zinc prices to continue to decline going forward led by global headwinds. We have however retained our volume estimates, led by the healthy growth during the quarter. We reduce our FY2016 and FY2017 estimates in view of the higher than expected fall in realizations and fall in zinc premiums. The stock is currently trading at 4.2x FY2017E EV/EBITDA. We value the stock at 6x FY2017E EV/EBITDA and arrive at a target price of Rs. 170. We retain our Accumulate rating on the stock.

Shares of HINDUSTAN ZINC LTD. was last trading in BSE at Rs.168.25 as compared to the previous close of Rs. 161.35. The total number of shares traded during the day was 109536 in over 2032 trades.

The stock hit an intraday high of Rs. 169.7 and intraday low of 162.05. The net turnover during the day was Rs. 18229538.

Source : Equity Bulls

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