MOSL: HINDUSTAN ZINC (Neutral)-Strong performance as expected-Zinc price outlook bullish, but priced in
​Hindustan Zinc: Strong performance as expected; Zinc price outlook bullish, but priced in; Maintain Neutral
(HZ IN, Mkt Cap USD20.7b, CMP INR318, TP INR322, 1% Upside, Neutral)
Strong performance as expected
- HZL's 2QFY17 EBITDA grew 46% YoY/27% QoQ to INR30.2b (in-line).
- Mine production was contained (-6% QoQ to 219kt) to draw down inventory. Sales volumes grew 2% QoQ for zinc (to 193kt), 18% QoQ for lead (to 40kt) and 33% QoQ for silver (to 146t).
- Reported CoP grew 1% QoQ (22% YoY due to higher coal cost) to USD984/t.
- Reversal of DMF of INR2.9b for the period Jan-Sep 2015 pursuant to the Supreme Court order was reported as exceptional.
- Adj. PAT grew 34% YoY/36% QoQ to INR22.5b (in-line), as higher other income and lower depreciation were offset by a higher tax rate (23% v/s est. of 21%).
Hedges volumes to offset price volatility; Capacity expansion on track
- HZL sold zinc (220kt @ USD3,084/t) and lead (30kt @ USD2,418/t) forwards to offset extreme price volatility in recent months. The deliveries are scheduled over 4QFY18-1QFY19.
- Guidance for project capex was maintained at USD300-325m for FY18E, and for CoP was raised to USD900-950/t for FY18E (as expected) on higher coal cost. Expansion to 1.2mt mine metal capacity by FY20 remains on track.
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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