Motilal Oswal is bearish on Hindustan Zinc has recommended sell rating on the stock with a target price of Rs 235 in its research report dated April 20, 2017.
Motilal Oswal's research report on Hindustan Zinc
HZ’s 4QFY17 EBITDA was up 35% QoQ/187% YoY to INR37b (beat of 5%), led by best-ever production (feast phase of mining hence not sustainable), concentrate sale and strong LME. Adj. PAT grew 32% QoQ/42% YoY to INR 30.5b, as higher operating profit was partly offset by lower other income (-35% YoY to INR 5b) and higher depreciation (+176% YoY to INR 5b).
Stock has been re-rated on bullish outlook for zinc and high dividend payout. Despite factoring in 10% higher LME and 6% higher USD/INR rate, the stock trades at rich EV/EBITDA of 8.1xFY18E. We thus downgrade to Sell, valuing it at INR 235/share (v/s INR 268 earlier) based on 6.5x FY18E EV/EBITDA.
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