MOSL: HINDUSTAN ZINC (Neutral)-Strong opr. performance despite mining challenges
HINDUSTAN ZINC: Strong opr. performance despite mining challenges; 12% volume growth but valuations are rich; Maintain Neutral
(HZ IN, Mkt Cap USD16.6b, CMP INR272, TP INR239, 12% Downside, Neutral)
- Hindustan Zinc (HZL)'s 4QFY19 EBITDA at INR27.9b (-1% QoQ) came in 8% higher vs. our estimate led by higher silver yield, higher by-product revenue and better zinc premium. Other income stood at INR5.4b (-2% QoQ; +48% vs. our est). PAT decreased 9% QoQ to INR20b (+4% vs. our estimate). For FY19, EBITDA stood at INR107b (-13% YoY) with PAT at INR80b (-11% YoY).
- Mine production was 1% lower QoQ (-4% YoY) due to geological challenges in Jan & Feb. Refined metal production declined 6% QoQ.
- Sales of zinc decreased 5% QoQ to 177kt, while lead declined 4% QoQ to 52kt. Sales of silver though rose 12% QoQ to 199t - indicating higher yield.
- Reported cost of production (CoP) declined USD10/t QoQ to USD987/t on higher coal linkage materialization and lower diesel costs, partly offset by higher mine development expenses.
Hindustan Zinc is engaged in the operation of mining, smelting and refining zinc and lead as their principal products and; silver and cadnium as by products. Co.'s resources and reserves total 365.1 tonnes throughout India. Co. also implements several projects to reduce energy and water consumption through wind power farms. The zinc, lead and silver metals are sold throughout India as well as the Middle East and Asia.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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