Prabhudas Lilladher's research report on Hindustan Zinc
Hindustan Zinc (HZ) reported EBITDA tad below our estimates by 3% due to lower volumes. While, earnings beat consensus estimates by 6%. HZ missed its guidance on volumes and ore grade over last 3-4 years due to weaker than assessed ore grade. Ore grade has fallen by ~30% in last 5 years due to lower grade of new mines and reduced share of Rampura Agucha (RA) mines. As the new shafts at both RA and Sindesar Khurd (SK) mines commenced operations, quality of operations would improve with better visibility on production and costs. However, ore grade would continue to remain volatile due to increase in share of mines having low grade of ore. Given the sharp run-up in stock price and unattractive valuations,
Outlook
we maintain Reduce rating with TP of Rs260 based on EV/EBITDA of 6x FY22e.
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