Buy Hindustan Zinc; target of Rs 145: Angel Broking

Angel Broking is bullish on Hindustan Zinc and has recommendation buy rating on the stock with a target of Rs 145 in its April 25, 2013 research report.
 
"Hindustan Zinc (HZL)’s 4QFY2013 results were above our expectations due to higher-than-expected concentrate sales. Maintain Buy. HZL’s net sales increased by 24.5 percent yoy to Rs3,850cr (above our estimate of Rs3,091cr), mainly due to increased sales volumes of silver and higher rupee realizations. Net sales were above our estimates due to higher-than-expected metal-in-concentrate (MIC) sales. Refined zinc production volumes, however, declined 4.0 percent yoy to 182kt while refined silver production volumes grew 33.0 percent yoy to 117kt. EBITDA margin expanded by 133bp yoy to 55.0 percent. Cost of production increased by 8.0 percent yoy to Rs44,901/tonne due to higher strip ratio at Rampura Agucha and lower acid credits, partially offset by lower power costs. The EBITDA increased by 27.5 percent yoy to Rs2,116cr in line with increase in net sales."
 
"The company’s other income rose by 8.1 percent yoy to Rs412cr while depreciation decreased by 27.0 percent yoy to Rs122cr. The tax rate was also lower at 8.9 percent in 4QFY2013 (vs 24.1 percent in 4QFY2012). Hence, the adjusted net profit grew by 53.6 percent yoy to Rs2,183cr. With a cash-rich balance sheet and strong growth in the production of zinc, lead and silver over FY2013-15, we maintain our positive stance on HZL. While we expect earnings growth to remain flat in FY2014, we expect higher earnings growth in FY2015 on the back of improvement in both, realizations as well as volumes. HZL is currently trading at inexpensive valuations of 3.5x and 2.4x FY2014E and FY2015E EV/EBITDA, respectively. Valuing the stock at 4.0x FY2015EV/EBITDA, we recommend Buy on HZL with a target price of Rs145," says Angel Broking research report.

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