Hindustan Zinc Q2 profit seen up 24%, but margin may shrink 410 bps

Hindustan Zinc's profit in July-September quarter is expected to increase 24 percent to Rs 2,366 crore, compared with Rs 1,902 crore in same quarter last fiscal.

Revenue from operations may grow 45 percent to Rs 5,544 crore from Rs 3,819 crore year-on-year, according to average of estimates of analysts polled by CNBC-TV18.

Operating profit during the quarter is seen rising 48 percent to Rs 2,997 crore, but margin may shrink 410 basis points to 54.1 percent compared with same quarter last fiscal.

Restricted supply of refined zinc at a global level led to strong zinc prices. LME zinc touched a near decade high.

In fact, zinc has been the big outperforming base metal in past 1 year. The rally can be attributed to depleting supply on account of mine closures.

Analysts feel demand for refined zinc metal is expected to comfortably exceed supply in 2017.

LME Zinc prices increased 31 percent YoY and 14 percent QoQ while Lead prices jumped 24 percent YoY and 8 percent QoQ.

Analysts said silver would be a bit of dampener as prices were down 14 percent YoY. Silver is only 10 percent of Hindustan Zinc's revenues.