Edelweiss is bullish on Hindustan Zinc has recommended buy rating on the stock with a target price of Rs 395 in its research report dated April 30, 2018.
Edelweiss' research report on Hindustan Zinc
We reiterate ‘BUY’ on Hindustan Zinc (HZL) with TP of INR395, implying 20% upside from current levels as: 1) growth momentum is expected to sustain with 1.35mtpa production capacity by FY23E; 2) Q4FY18 Cost of Production (CoP) fell 10% QoQ at USD925; and 3) sustained tightness is expected in zinc (Zn) market. Q4FY18 performance was slightly ahead of consensus owing to lower cost and higher silver volume. On volume growth and cost efficiencies we estimate EPS CAGR of 15% through to FY20. Our TP implies exit multiple of 12.7x, broadly in line with the stock’s recent trading range.
Outlook
We see HZL benefitting from volume growth of 1.2mtpa by FY20E and favourable Zn macro environment. As a result, we expect EPS CAGR 15% through to FY20. At CMP, the stock is trading at 11.1x FY20E EPS. We maintain ‘BUY/SO’ with TP of INR395, implying exit multiple of 12.7x, in line with its recent trading range.
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