ICICI Direct's research report on Hindustan Zinc
The stock has generated a breakout above the supply line joining the highs of April’19 ( Rs 291) and June’20 (Rs 204) currently at Rs 196, signalling reversal of the last two years corrective trend thus offering a fresh entry opportunity. The share price in the process has also closed above the last 10 weeks consolidation range (Rs204-167) and the 52 weeks EMA (currently at Rs 197) for the first time since April 2019 highlighting strength and continuation of the current up move. We expect the stock to continue its up move and head towards Rs 238 levels in the medium term as it is the measuring implication of the last 10 weeks consolidation range breakout which also confluence with the 61.8% retracement of the CY 2019-20 decline (Rs 310-116) placed at Rs 238
Hindustan Zinc (HZL) has a huge reserve base, which provides strong earnings visibility. During the year, total ore reserves increased from 92.6 million tonnes (MT) at the end of FY19 to 114.7 MT at the end of FY20, while mineral resources totaled 288.3 MT. Total R&R was unchanged at 403 MT from a year ago as ore consumed during the year was replenished. Total contained metal in ore reserves was 7.95 MT of zinc, 2.07 MT of lead and 256.2 million ounces of silver. The mineral resources contain 15.87 MT of zinc, 5.93 MT of lead and 641.8 million ounces of silver. At current mining rates, the R&R underpins metal production for more than 25 years. Over the last decade, HZL has increased its silver production by 4.1x to over 600 tonnes (currently contributing 13% to overall topline). Going forward, plans are to increase silver production to ~1000 tonnes going ahead, through higher production from existing, new deposits and also through enhanced recovery process. Hence the recent rise in steel prices augurs well for the company
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