Hindustan Zinc Ltd - Result Update - REDUCE - TP Rs.323 - Kotak

Hindustan Zinc's (HZ) reported PAT came in at Rs25.45bn (incl. exceptional gain of Rs2.9bn), up 33.8%/35.7% YoY/QoQ, backed by the strong realisation across the products and higher lead and silver volumes. EBITDA during the quarter grew 45.6%/26.8% YoY/QoQ to Rs30.24 bn and margin during the quarter stood at 57%, which was higher than estimates. HZ's near completion of shafts at Rampura Agucha and Sindesar Khurd mines makes the roadmap for ramp-up of volume to 1.2MT in the next one year. This, coupled with a potential jump in silver volume would drive the growth going forward. Besides these, HZ's cost leadership will ensure healthy free cash flow generation in the coming years as well. Higher than expected deficit during Jan-Aug 2017 (287KT) and sharp fall in inventory levels, bodes well for zinc prices. We have increased FY19 silver volumes and also revised our LME zinc assumptions higher, resulting in an upward revision in estimates to Rs23.1 (earlier Rs21.9) and Rs24.7 (earlier Rs23.4) for FY18E and FY19E, respectively. At CMP, the stock is trading at 6.9x FY19E EV/EBITDA, which in our view is fairly valued. Hence, we recommend REDUCE, with a revised target price of Rs323 (earlier Rs285), valuing it at 7x FY19E EBITDA.

Shares of HINDUSTAN ZINC LTD. was last trading in BSE at Rs.315.95 as compared to the previous close of Rs. 317.6. The total number of shares traded during the day was 58924 in over 881 trades.

The stock hit an intraday high of Rs. 323.35 and intraday low of 314.5. The net turnover during the day was Rs. 18711779.

Source : Equity Bulls

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