Way2Wealth neutral on Hindustan Zinc

Way2Wealth has maintained neutral rating on Hindustan Zinc (HZL) in its October 20, 2012 research report. The research firm expects HZL to post EPS Rs 14.8 FY13E. Expect increased silver production from SK mine with improved realization will be key driver of the profitability.

“Hindustan Zinc, mined metal production for the quarter has gone down 9% y-o-y at 190kt. The decline is mainly attributed to higher strip ratio at Rampura Agucha mine. However, production to improve in H2FY13 with reduction in strip ratio expected. ead production during the quarter has improved to 27kt due to ramp up of Sindesar Khurd mine. The firm has imported around 15000t of concentrate with high silver content increasing silver production to 92t. This has increased custom silver smelting during the quarter putting pressure on margin.  Refined Szinc sales volume was down 12% from 184kt to 162kt. In H2FY13 zinc production from RA mine is expected to increase.”

“The mining work at underground Kayar mine has commenced and the mine is expected to start ore production from FY14e. Reserves and resources for the mine are expected at 11mnt. The company currently has environmental clearance approval of 0.35mnt. Production from Rampura Agucha mine is expected to go underground from H2FY13e in a phased manner. Currently the mining in RA mine is continued in narrow vane which has resulted in higher strip ratio. Expansion of this mine will normalize zinc production from the mine. Ramping up of Sindesar Khurd mine will increase silver production thus reducing custom silver smelting. Silver production is expected to increase to 350kt in FY13e and further in FY14e.”

“Zinc production for the year is expected to remain stable and silver and lead will be key volume drivers. Silver production is expected to increase to 350t for FY13e. We expect HZL to post EPS Rs 14.8 FY13E. We feel increased silver production from SK mine with improved realization will be key driver of the profitability. However, global uncertain economic environment will impact zinc and lead prices.  At current market price the stock is 9xFY13E earnins and 5.7xFY13E EBITDA. We remain neutral,” says Way2Wealth research report.

Public holding more than 90% in Indian cos

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