Hindustan Zinc (HZL) reported steady set of performance for Q3FY21, wherein topline and EBITDA came in marginally higher than our estimate, while PAT came broadly in line with our estimates. For the quarter, zinc sales volumes came in at ~182000 tonnes (up 6% YoY, 1% QoQ, marginally higher than our estimate: 180048 tonnes), lead sales volume came in at ~53000 tonnes (up 26% YoY, however down by 7% QoQ, in line with our estimate: 53188 tonnes) while silver sales volume came in at ~183000 kg (up 19% YoY, however down 10% QoQ, higher than our estimate: 175000 kg). EBITDA came in at Rs. 3269 crore (up 43% YoY, 11% QoQ), marginally higher than our estimate of Rs. 3128 crore. EBITDA margin came in at 54.2%, broadly in line with our estimate of 54.0% (EBITDA margin of 52.2% in Q2FY21 and 49.0% in Q3FY20). HZL's Zinc cost of production (CoP) before royalty during quarter stood at US $946/tonne per tonne, lower by 12%YoY & higher by 3%QoQ. The ensuing PAT for Q3FY21 stood at Rs. 2200 crore (up 36% QoQ but down 13% YoY), in line with our estimate of Rs. 2173 crore.
Valuation & Outlook
Over the last few months, there has a healthy traction witnessed in Zinc prices on the LME. During Q3FY21, average Zinc prices on the LME stood at US$ 2628/tonne (up 10% YoY 12% QoQ). The uptick in Zinc prices augurs well for HZL. We have introduced FY23E estimates and roll over our valuations to FY23E. Going forward, we have modelled EBITDA margin of 51.5% in FY21E, 53.9% in FY22E and 54.8% in FY23E. We have valued the stock at 6x FY23E EV/EBITDA and arrived at a target price of Rs. 290, assigning a HOLD recommendation on the stock.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_HindZinc_Q3FY21.pdf
Shares of HINDUSTAN ZINC LTD. was last trading in BSE at Rs.283.2 as compared to the previous close of Rs. 296.45. The total number of shares traded during the day was 283887 in over 10024 trades.
The stock hit an intraday high of Rs. 304 and intraday low of 282. The net turnover during the day was Rs. 82132414.