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Hindustan Zinc (HZL) PAT for Q3FY12 was ~2% below expectations
(despite higher metal volume) due to higher than expected costs. The
new 350ktpa silver refinery has been successfully commissioned and the
management has guided for 400‐450t of production in FY13. Price hike by
Coal India will increase the cost of production for zinc by 2% (~USD15/t).
We marginally upgrade our FY12 EPS by 4% while broadly retaining FY13
estimates. Maintain BUY/SO with target price of INR166.
Operating costs shoot up on lower ore grade, new smelter
Zinc and lead volume at 191kt and 28.8kt were above our estimates of 184kt and 24kt
respectively while realisations were well in line. However, operating costs were 16%
above our estimates on account of a 7% QoQ increase in power and fuel costs, lower
grade of ore (QoQ grade down from 12.5% to 12.1%) from the Rampura Agucha mine,
higher than expected lead concentrate purchase and initial costs of the new 100ktpa
lead smelter. However, EBITDA at INR14bn was in line with our estimates due to better
volume. Ore grade is expected to improve to 13% in Q4FY12.
Silver refinery commissioned; FY13 output on track
A 350ktpa silver refinery was commissioned during the quarter while the ramp‐up of
Sindesar Khurd mine is on track to achieve target of 2 mtpa capacity in FY13. The
management has maintained its guidance of 400‐450t of silver output in FY13.
Longer term hike in mining costs by USD60‐70/t
Zinc mining costs will increase from the current USD280‐290/t to USD350/t as Rampura
Agucha mine gradually goes underground over the next four years. However, the
management guides that the impact on FY13 and FY14 will be marginal.
Outlook and valuations: Positive; maintain ‘BUY/SO’
We have cut our zinc and silver production volume for FY12 by ~6% and 8%
respectively. However, on account of INR depreciation and reduction in costs, our FY13
EBITDA and EPS are broadly intact. Retain ‘BUY/SO‘ with target price of INR166/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
Hindustan Zinc (HZL) PAT for Q3FY12 was ~2% below expectations
(despite higher metal volume) due to higher than expected costs. The
new 350ktpa silver refinery has been successfully commissioned and the
management has guided for 400‐450t of production in FY13. Price hike by
Coal India will increase the cost of production for zinc by 2% (~USD15/t).
We marginally upgrade our FY12 EPS by 4% while broadly retaining FY13
estimates. Maintain BUY/SO with target price of INR166.
Operating costs shoot up on lower ore grade, new smelter
Zinc and lead volume at 191kt and 28.8kt were above our estimates of 184kt and 24kt
respectively while realisations were well in line. However, operating costs were 16%
above our estimates on account of a 7% QoQ increase in power and fuel costs, lower
grade of ore (QoQ grade down from 12.5% to 12.1%) from the Rampura Agucha mine,
higher than expected lead concentrate purchase and initial costs of the new 100ktpa
lead smelter. However, EBITDA at INR14bn was in line with our estimates due to better
volume. Ore grade is expected to improve to 13% in Q4FY12.
Silver refinery commissioned; FY13 output on track
A 350ktpa silver refinery was commissioned during the quarter while the ramp‐up of
Sindesar Khurd mine is on track to achieve target of 2 mtpa capacity in FY13. The
management has maintained its guidance of 400‐450t of silver output in FY13.
Longer term hike in mining costs by USD60‐70/t
Zinc mining costs will increase from the current USD280‐290/t to USD350/t as Rampura
Agucha mine gradually goes underground over the next four years. However, the
management guides that the impact on FY13 and FY14 will be marginal.
Outlook and valuations: Positive; maintain ‘BUY/SO’
We have cut our zinc and silver production volume for FY12 by ~6% and 8%
respectively. However, on account of INR depreciation and reduction in costs, our FY13
EBITDA and EPS are broadly intact. Retain ‘BUY/SO‘ with target price of INR166/share.
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