Market

Hindustan Zinc ranking – Neutral: Results had been according to estimates

Revenue stood in line at Rs 88 bn (up 27% y-o-y and 10% q-o-q) in Q4FY22, led by increased LME costs, however was partly offset by flat lead costs. Ebitda stood at Rs 50 bn (up 28% y-o-y and 14% q-o-q). Power and gas prices stood at Rs 8 bn, up 10% q-o-q, led by increased coal costs. Other bills rose 11% q-o-q to Rs 19 bn, however had been partly offset by stock accumulation.

PAT grew 18% y-o-y and eight% q-o-q to Rs 29 bn, marginally beneath our estimate. Revenue/Ebitda/PAT stood at Rs 294/162 /97 bn in FY22, up 30%/39%/22% y-o-y. The progress was pushed totally by 34%/22% y-o-y progress in LME zinc/lead costs as steel gross sales volumes remained flat y-o-y.

FY23 steerage disappoints
Mgmt has guided at flat manufacturing progress in FY23, which hints at the potential of agency reaching peak mine output, except large-scale enlargement is achieved. Mined steel manufacturing is to be marginally increased at 1,050-1,075kt. We notice that mgmt has guided at an elevated price construction. We consider that is largely on account of their expectation of excessive coal and different enter prices. HZ is primarily depending on imported coal as coal linkages met solely 3% of its complete requirement in FY22.

Valuation pushed totally by LME
HZ is among the many lowest price producers of zinc globally. Yet, it’s dealing with extreme price pressures, particularly from rising coal prices, for which it has no various. Mgmt has guided at a refined manufacturing of 1,000-1,025kt in FY23. This has resulted in a 8% lower in our FY23 quantity estimate. We have lower our FY23 zinc/lead/silver gross sales quantity by 8%/10%/8%, factoring within the decrease administration steerage. However, we have now raised our FY23 zinc/lead LME value assumption by 37%/3%, given the tight zinc market, which is driving LME costs increased. With increased power costs in Europe and low bodily shares within the US, costs are prone to stay elevated for a while earlier than normalising.

We elevate our FY23 Ebitda/EPS estimate by 14%/3% and by 18%/4% for FY24 given the rise in LME costs. The identical is partly offset by a decline in FY23 volumes. The inventory is buying and selling at 6.5x our FY23 EV/Ebitda estimates. Despite a 37% rise in zinc costs and our TP being raised to Rs 370 per share (from `325 earlier), we preserve our Neutral ranking, an upside of 8% from present ranges.



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