Vedanta group all-India site visit takeaways - Motilal Oswal

THE INSITES: Silver lining amid uncertainties

We were positively surprised by the progress of Hindustan Zinc's silver-rich SK mines, where the expansion is running ahead of schedule.

HZL is targeting silver production of 400 tons v/s our estimate of 270 tons in FY12. Cost of production will remain constant.

Sterlite Energy's power plant ramp-up has been delayed in past due to bottlenecks in evacuation of power. Sterlite Energy's 2 units of 600MW each will start commercial production from April 2011. Other 2 units of 600MW each are scheduled to start in Sep and Dec.

VAL's 1.25mtpa smelter is 80% complete but put on hold due to shortage of alumina and better margins in selling power.

Cost of production of aluminium is US$1,750-1,800/ton. Balco's landed cost of alumina converted by VAL from its captive bauxite is US$300/ton.

Sesa Goa indicated that R&R would be enhanced at year-end. It remains keen on expansion to 40mtpa subject to permissions.

We believe Hindustan Zinc and Sesa Goa are trading at attractive valuations with upside risk to our estimates. Sterlite Industries (STLT IN, Mkt Cap US$12.4b, CMP Rs166, Buy) is likely to post strong EPS growth of 76.3% to Rs22.5 in FY12 due to growth in HZL, Anglo, Balco and Sterlite Energy businesses. We have a Buy rating on HZL, Sesa Goa and Sterlite Industries.

Source : Equity Bulls

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