Hindustan Zinc hits 52 week high in trade today

Hindustan Zinc stock has been buzzing. It has gone up about three times in past one year and it has hit a 52 week high on Wednesday at about Rs 1,000.

Here is a verbatim transcript of Archi Damania’s comments on CNBC-TV18. Also watch the accompanying video.

This company is a lowest cost zinc producer in the world. It has hit a 52 week high today at about Rs 1,000. Zinc prices have been stable in the past two-three months at about 2,200. They have gained about 10-15% and has sustained at the current levels. The valuation of Hindustan Zinc, which is at Rs 1,000, trades at about 9.5 times one year forward price to earnings multiple. The management has indicated that they will be acquiring the remaining 29.5% stake from the government by the end of this fiscal year. For this additional stake which they have to buy, the company will have to shell out about Rs 12,000 crore for the stake.

Asarco deal may not go in Sterlite’s favour. this leaves Sterlite with an additional cash of USD 2.6 billion. It gives additional liquidity for Sterlite to acquire the additional stake in Hindustan Zinc. Post this, Sterlite’s stake in Hindustan Zinc will be at 95%.

The management has indicated that they are not looking at de-listing Hindustan Zinc at any stage. However, what happens to the stock in terms of zinc prices would largely depend on whether China will be able to continue its 15% zinc demand growth in calendar year 2010. The demand in Western world for galvanised steel products is expected to improve. Overall, the zinc pricing scenario and estimate works in favour of Hindustan Zinc as well.