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Hindustan Zinc- Robust performance continues…
Hindustan Zinc’s (HZL) Q4FY11 numbers were above our estimates due
to higher than expected sales volumes in zinc and silver. During the
quarter, the company sold excess zinc and lead concentrates, which we
had not factored in our estimates. The company posted its highest ever
net sales of | 3237.3 crore (growth of ~27% YoY and ~23% QoQ) as
against our expectation of | 2779 crore. The increase was mainly on the
back of higher sales volume, improved operational efficiency and higher
realisations. EBITDA for Q4FY11 stood at | 1969 crore, registering growth
of ~27% YoY and ~30% QoQ. The net profit of the company grew
sharply by ~43% YoY and ~37% QoQ, mainly driven by a sharp increase
in other income (up ~125% YoY and ~46% QoQ).
Strong volume growth in zinc and silver
The company reported refined zinc sales at 1,93,460 million tonnes
(MT) (growth of 29% YoY and 9% QoQ). Silver sales for the quarter
grew 5% YoY and 20% QoQ to 44325 kg. However, refined lead
sales declined 11% YoY whereas sequentially it improved by 33% to
16358 MT. The company during the quarter sold 15,105 MT and
8,428 MT of zinc and lead concentrates.
Ramping up production at Sindesar Khurd Mine to boost earnings
The Sindesar Khurd Mine (SKM) operated at 85% utilisation in March
2011. We expect it to operate at its rated capacity of 1.5 MT in
FY12E. SKM is a silver rich mine and due to the ramping up of
operations here the company is confident of exiting FY12 with a
silver production capacity of 500 tonnes. On the conservative side,
we expect silver production to increase to 350 tonnes in FY12E and
450 tonnes in FY13E, which will boost overall profits of the company.
Valuation
Going forward, we expect the company’s sales to grow at a CAGR of
19%, thereby leading to CAGR of 17% and 19% in EBITDA and PAT,
respectively, over FY11-FY13E. At the CMP of | 150, the stock is trading at
FY12E EV/EBITDA of 8.2x and FY13E EV/EBITDA of 6.9x. We value the
stock at FY13E EV/EBITDA of 7.5x to arrive at our target price of | 161. We
have maintained our HOLD rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindustan Zinc- Robust performance continues…
Hindustan Zinc’s (HZL) Q4FY11 numbers were above our estimates due
to higher than expected sales volumes in zinc and silver. During the
quarter, the company sold excess zinc and lead concentrates, which we
had not factored in our estimates. The company posted its highest ever
net sales of | 3237.3 crore (growth of ~27% YoY and ~23% QoQ) as
against our expectation of | 2779 crore. The increase was mainly on the
back of higher sales volume, improved operational efficiency and higher
realisations. EBITDA for Q4FY11 stood at | 1969 crore, registering growth
of ~27% YoY and ~30% QoQ. The net profit of the company grew
sharply by ~43% YoY and ~37% QoQ, mainly driven by a sharp increase
in other income (up ~125% YoY and ~46% QoQ).
Strong volume growth in zinc and silver
The company reported refined zinc sales at 1,93,460 million tonnes
(MT) (growth of 29% YoY and 9% QoQ). Silver sales for the quarter
grew 5% YoY and 20% QoQ to 44325 kg. However, refined lead
sales declined 11% YoY whereas sequentially it improved by 33% to
16358 MT. The company during the quarter sold 15,105 MT and
8,428 MT of zinc and lead concentrates.
Ramping up production at Sindesar Khurd Mine to boost earnings
The Sindesar Khurd Mine (SKM) operated at 85% utilisation in March
2011. We expect it to operate at its rated capacity of 1.5 MT in
FY12E. SKM is a silver rich mine and due to the ramping up of
operations here the company is confident of exiting FY12 with a
silver production capacity of 500 tonnes. On the conservative side,
we expect silver production to increase to 350 tonnes in FY12E and
450 tonnes in FY13E, which will boost overall profits of the company.
Valuation
Going forward, we expect the company’s sales to grow at a CAGR of
19%, thereby leading to CAGR of 17% and 19% in EBITDA and PAT,
respectively, over FY11-FY13E. At the CMP of | 150, the stock is trading at
FY12E EV/EBITDA of 8.2x and FY13E EV/EBITDA of 6.9x. We value the
stock at FY13E EV/EBITDA of 7.5x to arrive at our target price of | 161. We
have maintained our HOLD rating on the stock.
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