Result Update: Hindustan Zinc Ltd - REDUCE - TP Rs.315 - Kotak

Hindustan Zinc's (HZ) reported PAT came in at Rs22.3bn, up 13.6% QoQ (down 3.9% YoY), lower than our estimates due to higher than expected input costs, increase in depreciation, lower other income and increase in tax rate to 26.7%. EBITDA was marginally lower than estimates at Rs32.4bn, with a margin of 54.8%. On account of weaker grades and higher input costs, the company has increased its cost of production guidance for Q4FY18, which was up 4.5% QoQ in 3QFY18 in Rupee terms. On volume front, the company is quite confident on achieving growth in FY18 and also indicated that mines expansions are on track and expect volume to grow to 1.2MT by FY20. We have lowered our estimates for FY18 and FY19 to Rs21.8 and Rs23.5, respectively, due to lower grades and higher input prices and introducing FY20 with an EPS of Rs24.9. Though, we continue to believe the price outlook for zinc and lead continues to remain benign on supply constraint & low stock levels, which is positive for HZ. But, at CMP, the stock is fairly valued at 6.9x/6.1x FY19E/FY20E. Hence, we continue to maintain REDUCE rating on the stock, with a revised target price of Rs315 (earlier Rs323).

Shares of HINDUSTAN ZINC LTD. was last trading in BSE at Rs.298.25 as compared to the previous close of Rs. 293.25. The total number of shares traded during the day was 145480 in over 2585 trades.

The stock hit an intraday high of Rs. 300.9 and intraday low of 294.7. The net turnover during the day was Rs. 43367478.

Source : Equity Bulls

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