Hold Hindustan Zinc; target of Rs 290: ICICI Direct

ICICI Direct recommended hold rating on Hindustan Zinc with a target price of Rs 290 in its research report dated January 21, 2021.

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January 28, 2021 / 02:59 PM IST

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ICICI Direct's research report on Hindustan Zinc

Hindustan Zinc (HZL) reported steady set of performance for Q3FY21, wherein topline and EBITDA came in marginally higher than our estimate, while PAT came broadly in line with our estimates. For the quarter, zinc sales volumes came in at ~182000 tonnes (up 6% YoY, 1% QoQ, marginally higher than our estimate: 180048 tonnes), lead sales volume came in at ~53000 tonnes (up 26% YoY, however down by 7% QoQ, in line with our estimate: 53188 tonnes) while silver sales volume came in at ~183000 kg (up 19% YoY, however down 10% QoQ, higher than our estimate: 175000 kg). EBITDA came in at Rs 3269 crore (up 43% YoY, 11% QoQ), marginally higher than our estimate of Rs 3128 crore. EBITDA margin came in at 54.2%, broadly in line with our estimate of 54.0% (EBITDA margin of 52.2% in Q2FY21 and 49.0% in Q3FY20). HZL’s Zinc cost of production (CoP) before royalty during quarter stood at US $946/tonne per tonne, lower by 12%YoY & higher by 3%QoQ. The ensuing PAT for Q3FY21 stood at Rs 2200 crore (up 36% QoQ but down 13% YoY), in line with our estimate of Rs 2173 crore.

Outlook

We have valued the stock at 6x FY23E EV/EBITDA and arrived at a target price of Rs 290, assigning a HOLD recommendation on the stock (earlier target price of Rs230).