Buy Hindustan Zinc; target of Rs 153: Firstcall Research

Firstcall Research is bullish on Hindustan Zinc and has recommended buy rating on the stock with a target of Rs 153 in its October 19, 2012 research report.

“Hindustan Zinc (HZL) was incorporated in January 1966. Hindustan Zinc is a Vedanta Group company in Zinc, Lead and Silver business. HZL is India’s leading integrated producer of zinc & lead and is among the world’s leading integrated producers. It has a metal production capacity of 10, 64,000 tonnes per annum(879,000 tonnes of zinc and 185,000 tonnes of lead). HZL has around 7,000 employees. The company is a subsidiary of the NYSE listed, Sterlite Industries (India) Limited (NYSE: SLT) and London listed FTSE 100 diversified metals and mining major, Vedanta Resources plc. The Company has four mines and four smelting operations: mines are situated at Rampura Agucha (largest zinc producing mine in the world), Sindesar Khurd, Rajpura Dariba and Zawar in the State of Rajasthan; while the smelters are located at Chanderiya, Debari and Dariba in the State of Rajasthan and Vizag in the State of Andhra Pradesh.”
“Hindustan Zinc Ltd is a flagship company of Hindustan Group, is among the top leading metal industry in India, reported its financial results for the quarter ended 30 June, 2012. The second quarter witness a healthy increase in overall sales & net profit of the company on an account of better performance in metal production, higher sales volumes, improved price realizations for Silver, rupee depreciation, higher investment income and enhanced operational efficiencies. The company’s net profit jumps to Rs.15397.90 million against Rs.13446.90 million in the corresponding quarter ending of previous year, an increase of 14.51%. Revenue for the quarter rose 8.67% to Rs.28654.60 million from Rs.26368.20 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.3.64 a share during the quarter, registering 14.51% increase over previous year period. Profit before interest, depreciation and tax is Rs.19828.60 millions as against Rs.18277.20 millions in the corresponding period of the previous year.”
“At the current market price of Rs.135.00, the stock P/E ratio is at 9.34 x FY13E and 8.51x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.14.45 and Rs.15.87 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 11% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 6.05 x for FY13E and 5.46 x for FY14E. Price to Book Value of the stock is expected to be at 1.73 x and 1.44 x respectively for FY13E and FY14E. The second quarter witness a healthy increase in overall sales as well as profitability on account of better performance in metal production, higher sales volumes, improved price realizations for Silver, rupee depreciation, higher investment income and enhanced operational efficiencies, We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend buy in this particular scrip with a target price of Rs.153.00 for Medium to long term investment,” says Firstcall Research report. Shares held by Mutual Funds/UTI Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

Read More