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Hindustan Zinc Limited ---------------------------------------------------- Maintain OUTPERFORM
Healthy cash generation; increase in costs not worrying
● Results were better than expected: The 9% beat in sales and 14%
in EBITDA (Figure 1) came from: (1) better Zn premium over LME
and (2) higher value of concentrate sales (Figure 2). Higher other
income meant EPS was 23% higher than expected.
● Overall cost/t increased US$95/t (including royalty) QoQ: If we
allocate increase/decrease in stock to other heads, we estimate
power costs rose ~US$60/t; then, ~US$13/t increase is due to
rupee appreciation and the remaining ~US$22/t is insignificant,
and is occurring for most miners: effectively the cost curve for Zinc
is getting bumped up.
● Production of mined metal missed due to an unplanned shutdown in
Agucha for two weeks: this has now recovered fully. Mined metal
volume fell 18% QoQ, but rose 3.5% YoY. Refined metal production
and sales were unhurt due to the use of concentrate inventory.
● High silver grade SK mine’s run rate is now at 1.2 mn t, and target
FY12 exit capacity is 2 mn t. FY12 silver production target is 300-350
kt, down from the earlier 400 kt. We maintain our 270 kt estimate.
● Our 1Q12 estimates for Sterlite are now Rs98 bn, Rs24.8 bn and
Rs15.7 bn for sales, EBITDA and PAT, respectively.
Good sales beat, increase in costs/t not very high
Results were better than expected: The 9% beat in sales and 14% in
EBITDA came from: (1) better Zn premium over LME and (2) higher
value of concentrate sales. Higher other income meant EPS was 23%
higher than expected.
Overall cost/t increased US$95/t (including royalty) QoQ. If we allocate
increase/decrease in stock to other heads, we estimate power costs
rose ~US$60/t; then, ~US$13/t increase is due to rupee appreciation,
and the remaining ~US$20/t is insignificant and is occurring for most
miners: effectively the cost curve for Zinc is getting bumped up.
Production of mined metal was lower due to an unplanned shutdown
in Rampura Agucha mine for two weeks: mined metal volumes were
down 18% QoQ. Refined metal sales, however, were do
Key takeaways from conference call
● Mining at Rampura Agucha has restarted, and management
expects to recover lost volumes in 2Q-3Q12. Concentrate stock is
at 25 days.
● SK mine’s current run rate is 1.2 mn t. Target FY12 exit capacity is
2 mn t. FY12 silver production target is 300-350 kt. With 1Q at 60
kt, required run rate is 80 kt/quarter – achievable, in our view. For
now we maintain our 270 kt estimate for FY12.
● 1Q12 capex was Rs3.6 bn. Cash and equivalents are now at
Rs157 bn; 112% of EBITDA was converted into FCF.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindustan Zinc Limited ---------------------------------------------------- Maintain OUTPERFORM
Healthy cash generation; increase in costs not worrying
● Results were better than expected: The 9% beat in sales and 14%
in EBITDA (Figure 1) came from: (1) better Zn premium over LME
and (2) higher value of concentrate sales (Figure 2). Higher other
income meant EPS was 23% higher than expected.
● Overall cost/t increased US$95/t (including royalty) QoQ: If we
allocate increase/decrease in stock to other heads, we estimate
power costs rose ~US$60/t; then, ~US$13/t increase is due to
rupee appreciation and the remaining ~US$22/t is insignificant,
and is occurring for most miners: effectively the cost curve for Zinc
is getting bumped up.
● Production of mined metal missed due to an unplanned shutdown in
Agucha for two weeks: this has now recovered fully. Mined metal
volume fell 18% QoQ, but rose 3.5% YoY. Refined metal production
and sales were unhurt due to the use of concentrate inventory.
● High silver grade SK mine’s run rate is now at 1.2 mn t, and target
FY12 exit capacity is 2 mn t. FY12 silver production target is 300-350
kt, down from the earlier 400 kt. We maintain our 270 kt estimate.
● Our 1Q12 estimates for Sterlite are now Rs98 bn, Rs24.8 bn and
Rs15.7 bn for sales, EBITDA and PAT, respectively.
Good sales beat, increase in costs/t not very high
Results were better than expected: The 9% beat in sales and 14% in
EBITDA came from: (1) better Zn premium over LME and (2) higher
value of concentrate sales. Higher other income meant EPS was 23%
higher than expected.
Overall cost/t increased US$95/t (including royalty) QoQ. If we allocate
increase/decrease in stock to other heads, we estimate power costs
rose ~US$60/t; then, ~US$13/t increase is due to rupee appreciation,
and the remaining ~US$20/t is insignificant and is occurring for most
miners: effectively the cost curve for Zinc is getting bumped up.
Production of mined metal was lower due to an unplanned shutdown
in Rampura Agucha mine for two weeks: mined metal volumes were
down 18% QoQ. Refined metal sales, however, were do
Key takeaways from conference call
● Mining at Rampura Agucha has restarted, and management
expects to recover lost volumes in 2Q-3Q12. Concentrate stock is
at 25 days.
● SK mine’s current run rate is 1.2 mn t. Target FY12 exit capacity is
2 mn t. FY12 silver production target is 300-350 kt. With 1Q at 60
kt, required run rate is 80 kt/quarter – achievable, in our view. For
now we maintain our 270 kt estimate for FY12.
● 1Q12 capex was Rs3.6 bn. Cash and equivalents are now at
Rs157 bn; 112% of EBITDA was converted into FCF.
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