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In an interview to CNBC-TV18, Sunil Duggal, CEO of Hindustan Zinc spoke about the results and his outlook for the company.
Zinc has been the big outperforming base metal this year due to depleting supply on account of mine closures at global level that led prices higher.
Management's commentary is important to watch out for than results. Majority of earnings' contribution come from Hindustan Zinc and Cairn India, wherein Vedanta owns 65 percent and 59 percent stake, respectively. Both companies' results beat analysts' expectations.
Operating profit is likely to increase 89 percent to Rs 2,800 crore and margin may expand 1,180 basis points to 54.9 percent compared with year-ago quarter due to normalisation in production and higher product prices. Cost of production is expected to be lower due to operating leverage coming from higher volume.
Net Sales are expected to increase by 36.7 percent Q-o-Q (up 40.5 percent Y-o-Y) to Rs 4820 crore, according to Religare.
Net Sales are expected to increase by 61.4 percent Q-o-Q (up 65.9 percent Y-o-Y) to Rs 5690.4 crore, according to Motilal Oswal.
Net Sales are expected to increase by 36.7 percent Q-o-Q (up 54.5 percent Y-o-Y) to Rs 5298.8 crore, according to Edelweiss.
Vedanta, an associate company of the London Stock Exchange listed diversified resources group Vedanta Resources Plc, is expected to report a 5 percent degrowth in second quarter profit at Rs 930 crore and a 6 percent fall in revenue at Rs 15,519.3 crore on yearly basis, according to analysts polled by CNBC-TV18.
Normally Hindustan Zinc spends USD 200-225 million on mining expansion every year. But according to Duggal, the spending may rise to USD 300-320 million.
Hindustan Zinc, a subsidiary of Vedanta Resources Plc, is likely to report a 35 percent degrowth year-on-year in profit at Rs 1,491 crore for July-September quarter, according to average of estimates of analysts polled by CNBC-TV18.
Sales are expected to increase by 40.1 percent Q-o-Q (down 12.1 percent Y-o-Y) to Rs 3545.1 crore, according to ICICI Securities.
Analysts say commodity prices may drive earnings of the company but profitability already discounted as Hindustan Zinc and Cairn results announced. Hence, commentary on Cairn merger and debt repayment will be closely watched.
Hindustan Zinc will focus on increasing recoveries from silver as well as Zinc mines, says Sunil Duggal, CEO and Wholetime Director of the company.
Operating profit is expected to slip 35 percent to Rs 1,076 crore due to lower volume on ongoing mine development. Margin may contract by 330 basis points at 42.4 percent on annual basis.
Sales are expected to decrease by 12.7 percent Q-o-Q (down 24.7 percent Y-o-Y) to Rs 2734.3 crore, according to ICICI Securities
Operating profit may drop 27 percent to Rs 1,525 crore during the quarter and margin may shrink 930 basis points to 44.9 percent compared to year-ago period.
Analysts fell profitability already priced in Hindustan Zinc and Cairn India results. Even more than 80 percent of operating profit already priced in from both companies.
Hindustan Zinc Limited is on track to achieve volume guidance that it had outlined last year, which is 900-950 kiloton, CEO Sunil Duggal told CNBC-TV18.
Analysts polled by CNBC-TV18 poll say that reversal of higher DMF provisions will aid margins. DMF has been notified at 30 percent of royalty but in Q1FY16 the company was providing for DMF at 50 percent.
Its profitability is solely driven by Hindustan Zinc and Cairn India, wherein company owns 65 percent and 59 percent stake, respectively. Both companies contribute around 75 percent of the total EBITDA of Vedanta.
Operating profit in Q1 may jump 12.8 percent to Rs 1,525 crore but margin may decline 370 basis points to 41.3 percent compared to same quarter last year.
Vedanta's (earlier known as Sesa Sterlite) fourth quarter profit is likely to fall 57 percent year-on-year to Rs 690 crore due to weak earnings from Cairn India, according to a CNBC-TV18 poll.
Tom Albanese, chief executive officer, Sesa Sterlite, says he expects iron ore mining to start sooner in Karnataka than in Goa.
Vedanta Group‘s Sesa Sterlite is expected to report a 21 percent drop in third-quarter net profit to Rs 1,480 crore (versus Rs 1,860 crore year-on-year) while revenues are expected to come in flat at Rs 19,300 crore (compared to Rs 19,523 crore), according to a CNBC-TV18 poll of analysts.
Hindustan Zinc's third quarter profit after tax is expected to jump 24.2 percent year-on-year to Rs 2,140 crore, according to the average of estimates of analysts polled by CNBC-TV18. Analysts expect higher other income led by mark-to-market gains on debt instruments.