Motilal Oswal's research report on Hindustan Zinc
Hindustan Zinc’s (HZ) revenue at INR79b (down 2% YoY and 6% QoQ) in 3QFY23 was in line with our estimate. Revenue was marginally lower YoY, on the back of lower LME prices coupled with lower refined metal volumes. EBITDA at INR37b (down 15% YoY and 16% QoQ) was in line with our estimates. Power and fuel costs were at INR10b (up 43% YoY and 2% QoQ), driven by elevated coal prices and lower coal linkages in 3QFY23. EBITDA margin stood at 47% (lower by 580bp QoQ), on the back of higher input costs, partially offset by lower royalty expense. Cost of Production (CoP) for 3QFY23 stood at USD1,293/t, up 3% QoQ and 13% YoY (up 24% YoY and 6% QoQ in INR terms) on the back of higher input costs and coal prices and lower coal linkages.
We have raised our FY24 estimates to incorporate the cost reduction benefits. At its current levels, HZ is trading at a rich valuation of 6.7x FY24 EV/EBITDA. We reiterate our neutral rating on the stock for a target price of INR350 (6x FY24 EV/EBITDA).