Motilal Oswal's research report on Hindustan Zinc
1QFY26 revenue declined 4% YoY/15% QoQ to INR77.7b, in line with our est. of INR75.7b. The decline was primarily driven by lower volumes and low commodity prices, offset by higher prices of silver and by-products and stronger dollar. EBITDA was down 2% YoY/20% QoQ at INR38.6b, primarily due to weak volumes and softened commodity prices. EBITDA margin contracted to 49.7% from 53% in 4QFY25 and 48.5% in 1QFY25. Zinc cost of production (CoP) stood at USD1,010/t, down 9% YoY (+2% QoQ), on account of improved metal grades and increased consumption of domestic coal and renewable energy. APAT stood at INR22.3b (-5% YoY and -26% QoQ) against our est. of INR21.5b in 1QFY26. Mined metal stood at 265kt (flat YoY and -15% QoQ), led by mine preparation activities carried out during the quarter. Refined metal production at 250kt (-5% YoY and -7% QoQ - Refined zinc/lead production of 202kt/48kt), in line with plant availability and on account of maintenance activities. Saleable silver production declined 11% YoY and 16% QoQ to 149kt, majorly due to lower silver input from SK mine and in line with lead production.
Outlook
At CMP, HZ trades at 7.8x FY27E EV/EBITDA, and we believe the current valuation prices in all the positive factors. We reiterate our Neutral rating with a TP of INR465 (premised on 8.5x EV/EBITDA on FY27 estimates).
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