Buy Hindustan Zinc; target of Rs 154: Dolat Capital

Dolat Capital is bullish on Hindustan Zinc and has recommended buy rating on the stock with a target of Rs 154 in its April 26, 2013 research report.
 
"HZL posted a strong set of numbers with EBITDA and PAT growing by 27.5 percentYoY and 53.3 percentYoY due to higher concentrate sales, lower depreciation and lower tax rate. Its profits at Rs 21.6bn were better than our est of Rs 19.6bn primarily due to higher EBITDA of Rs 21.16 bn (DCe: Rs 19.55bn), lower depreciation and tax rate of 9 percent (DCe:14 percent). HZL has guided for 1mn tonne (+15 percentYoY) of Lead and Zinc production and 360kt of silver (integrated production) which has reduced the impact on revised earnings due to lower silver prices. It continued its resource accretion story and has increased its R&R by 7 percentYoY to 348.3mn (25+ years). We continue to maintain our Buy with target price of Rs 154 (5xFy15EV/EBITDA) on HZL given its low cost resource base, 7 percent volume CAGR over FY13-FY15E, strong balance sheet and compelling valuations of 2.7xFY15EV/EBITDA. Acquisition of 29.5 percent stake of Govt of India by Vedanta remains additional trigger in the stock."
 
"HZL net sales at Rs 39.08 bn (DCe: Rs 39.85bn) were inline. Operating profits at Rs 21.16bn (DCe: Rs 19.6bn) were better than estimate primarily due to lower cost and higher concentrate sales of 61kt vs DCe:31kt). EBITDA margins improved by 780bps QoQ to 54 percent as the company had higher share of integrated metal sales and high margin concentrate sales. Average Zinc prices remain flat QoQ to USD 2033/tonne whereas Lead prices increased sequentially by 10 percentQoQ to USD2301 per tonne. Cost of production also remained flat QoQ at Rs 44900 per tonne (excluding royalty) despite increase in diesel cost due to higher volumes," says Dolat Capital research report.

Public holding more than 90% in Indian cos

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