Motilal Oswal's research report on Hindustan Zinc
Hindustan Zinc’s (HZ) revenue at INR83b (up 36% YoY and down 11% QoQ) in 2QFY23 was marginally ahead of our estimate of INR 78b. The revenue was higher YoY, driven by 48% higher zinc sales, which was primarily due to 9% higher Zinc prices, 15% higher volumes, and 150% higher premium. The premium was on account of unwinding of hedges, which the company had created at the start of the Russia-Ukraine conflict. EBITDA stood in line at INR44b (up 32% YoY and down 14% QoQ). Power and fuel costs were at INR10b, further up 11% QoQ after a 15% QoQ increase in 1QFY23, driven by higher coal prices as FSA materialization improved slightly to 14% in 2Q v/s 8% in 1Q.
Outlook
However, a rich valuation at 5.6x FY23 EV/EBITDA compels us to reiterate our Neutral rating with an unchanged TP of INR 255, based on 5x FY23 EV/EBITDA.
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