Accumulate Hindustan Zinc; target of Rs 151: PLilladher

Prabhudas Lilladher is bullish on Hindustan Zinc and has recommended accumulate rating on the stock with a target price of Rs 151 in its January 21, 2013 research report.

“Hindustan Zinc, despite 10.6% rise in realisations, zinc-lead revenue grew by a meagre 1.5% YoY to Rs23.5bn (PLe: Rs23.4bn) owing to 8.3% decline in volumes at 200k tonnes (t). On the contrary, silver revenues grew ~2.5x to Rs6.5bn (PLe: Rs6.4bn) on the back of 2.3x rise in volumes at 113t. Thanks to a strong margins profile in silver business, EBITDA grew by 3.3% YoY to Rs14.07bn (PLe: 14.08bn) despite 36% increase in zinc-lead cost of production (CoP) at Rs86,650 (US$1600)/t and reduced zinc-lead volumes. PAT grew ~22% at Rs15.6bn, above our estimate on the back of lower tax rate (11.5% v/s PLe: 16%).”

“The Board of Directors approved the next phase of growth plan to expand the aggregate mined metal capacity by 43% to 1.2mtpa through expansion across the mining assets. The projects will be completed in the next six years and benefit from these projects will start flowing in from the third year itself. Company would spend US$250m p.a. over the next six years. However, approvals for SK, Zawar and Dariba mines stand pending.”

“Hindustan Zinc reported Q3FY13 earnings in line with expectation on EBITDA level, while it beats expectation on PAT on the back of lower tax rate. Driven by sound returns profile (RoE: 20%+) and attractive valuations (EV/EBITDA: 4.4xFY14E), we reiterate our. Accumulate rating with TP of Rs151, 5x EV/EBITDA FY15E,” says Prabhudas Lilladher research report.

FIIs holding more than 30% in Indian cos

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