Buy Hindustan Zinc; target of Rs 193: Emkay

Emkay's research report on Hindustan Zinc

Better than expected volume helped stronger performance largely offsetting the provision of Rs 1.2 bn made as per MMDR Amendment meant for DMF and NMET contribution

Adjusting for the provision the EBITDA and PAT stood at Rs 20.98 bn and 21.12 bn respectively, in line with our expectations. Reported EBITDA and PAT came at Rs 19.8 bn (+13%/ -5% on YoY/QoQ) and 19.97 bn (+6%/ -16% on YoY/ QoQ)

Driven by 223 kt and 37 kt sales volume for zinc and lead respectively the topline grew by 13%/ 7% on YoY/ QoQ to Rs 41.3 bn against our revised estimates of Rs 39.9 bn

Factoring in higher volume and contribution to DMF and NMET, we continue to value the company at 5xFY17 EV/ EBITDA. Maintain BUY with a target price of Rs 193. While, higher contribution to DMF would be a negative, stronger volume would be a positive

"We have revised our volume estimates upward and also taken into account contribution to the DMF and NMET (1/3rd and 2% of royalty respectively). Also, changed our LME and INR assumptions. Factoring in all these we maintain BUY with a target price of Rs 193", says Emkay Global Financial Services research report.

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