JM Financial is bullish on Hindustan Zinc has recommended buy rating on the stock with a target price of Rs 300 in its research report dated October 22, 2018.
JM Financial's research report on Hindustan Zinc
Hindustan Zinc reported an EBITDA of INR 23.3bn, in-line with JMFe. EBITDA declined 23% YoY, driven by lower zinc volumes (17% YoY) and higher CoP. Zinc volumes declined, driven by transition to underground mining leading to lower grades and higher strip ratio. CoP increased YoY, driven by lower zinc volumes, higher thermal coal costs and INR depreciation. Near term zinc price outlook remains steady, driven by a) ILZSG deficit forecast of 322kt in CY18 and b) multi-year low warehouse inventory (224kt of LME+SHFE inventory). The company has declared a strong interim dividend of INR 20/sh (div. yield of 7.1%). We remain positive on HZL given its presence in the lower end of the global cost curve facilitated by high grade captive mines sufficient to meet requirements for decades, 100% captive power plants, sizeable scale of c.1mn tons+, diversified revenue stream with increasing contribution from silver sales and strong balance sheet with net cash of INR 35/share (ex-dividend).
Outlook
We roll forward to FY21 arriving at fair value of INR 300/sh. Maintain BUY.
For all recommendations report, click here
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