Buy Hindustan Zinc; target of Rs 180: Firstcall Research

Firstcall Research's report on Hindustan Zinc

"Hindustan Zinc has registered its net sales of Rs. 38531.40 million for the 3rd quarter of the financial year 2015 as against Rs. 34500.70 million in the corresponding quarter of the previous year. The Net sales increase in Q3 was driven by higher Zinc LME and lead & silver metals volumes, partly offset by lower silver prices and refined zinc volume. The company has reported an EBITDA of Rs. 29013.50 million, an increase of 29.08% y-o-y against Rs. 22477.00 million over corresponding quarter of the previous year, as a result of better revenues and lower cost production. In Q3 FY15, net profit is at Rs. 23793.70 million against Rs. 17227.20 million in Q3 FY14. The company has registered an EPS of Rs. 5.63 for the December quarter of current year as against an EPS of Rs. 4.08 in the corresponding quarter of the previous year."

OUTLOOK AND CONCLUSION

At the current market price of Rs. 165.90, the stock P/E ratio is at 8.08 x FY15E and 6.88 x FY16E respectively.

Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.20.53 and Rs.24.13 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 14% over 2013 to 2016E respectively.

On the basis of EV/EBITDA, the stock trades at 3.76 x for FY15E and 2.82 x for FY16E.

Price to Book Value of the stock is expected to be at 1.60 x and 1.39 x respectively for FY15E and FY16E.

We recommend ‘BUY’ in this particular scrip with a target price of Rs 180 for Medium to Long term investment

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