MOSL: HINDUSTAN ZINC (Neutral)-Operating performance in line-Zinc price outlook remains bullish
​Hindustan Zinc: Operating performance in line; Zinc price outlook remains bullish; Maintain Neutral
(HZ IN, Mkt Cap USD18.4b, CMP INR281, TP INR301, 7% Upside, Neutral)
- 1QFY18 operating performance was in line
- Hindustan Zinc's (HZL) EBITDA increased 111% YoY to INR23.8b (in-line) in 1QFY18, driven by 85% growth in mine production to 233kt and a 35% increase in LME for zinc. Mine production was lower last year due to famine phase.
- Zinc volumes were 7% ahead of estimates at 194kt (+90% YoY).
- Cost of production increased 2% YoY (+18% QoQ) to INR62,698/t due to rising commodity prices and mine mix (higher stripping ratio in open cast mines) and lower average grade.
- PBT at INR24.2b was 12% ahead of estimate, led by lower DDA and higher other income (net of finance cost).
Mine development running aggressively; eying higher volumes beyond FY20E
- Mine development is progressing well at 8,828 meters (+82% YoY, +28% QoQ).
- Vertical shaft at RA in on track to start production by 2HFY19. SK mine vertical shaft and expansion of mill to 5.8mtpa too will be completed in 1HFY19E. Zawar mine expansion to 2.7mtpa too will be completed.
- Targeting aggressive production expansion beyond FY20E (mine 1.5mtpa).
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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