Neutral Hindustan Zinc; target of Rs 300: Motilal Oswal

Motilal Oswal recommended Neutral rating on Hindustan Zinc with a target price of Rs 300 in its research report dated April 22, 2023.

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April 24, 2023 / 14:41 IST

Neutral

26 Aug, 2025 12:21

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Motilal Oswal's research report on Hindustan Zinc

Hindustan Zinc's (HZ) revenue came in at INR85b (down 3% YoY and up 8% QoQ) in 4QFY23, in line with our estimate. EBITDA stood at INR43b (down 14% YoY and up 15% QoQ), in line with our estimate. The improved performance QoQ was aided by lower power and fuel costs (INR8b; up 9% YoY/down 16% QoQ), higher volumes and better LME movement. EBITDA margin stood at 50% (up 288bp QoQ). The cost of production (CoP) fell to USD1,214/t in 4QFY23 from USD1,293/t in 3QFY23. The reduction in CoP was driven by the softening in coal prices by ~USD80/t and a strong operational performance. APAT came in at INR26b (down 12% YoY and up 20% QoQ), below our estimate of INR28b. It was impacted by higher depreciation and interest costs, which were partially offset by lower taxes and higher other income. Refined zinc sales for 4QFY23 stood at 216kt (up 1% YoY and up 3% QoQ), refined lead sales came in at 54kt (up 10% YoY and 17% QoQ), and silver sales stood at 182t (up 12% YoY and 13% QoQ). The improvement was driven by better plant availability and mined metal availability. FY23 revenue/EBITDA/PAT stood at INR341b/INR175b/INR105b, up 16%/8% /8% YoY. The company posted its best-ever full year refined metal production of 1,032kt (up 7% YoY) thanks to better plant availability and a consistent MIC flow from mines. Refined zinc sales for FY23 stood at 821kt (up 6% YoY), refined lead sales stood at 211kt (up 10% YoY), and silver sales came in at 714t (up 10% YoY).

Outlook

We have marginally raised our FY24 estimates to incorporate cost reduction benefits. HZ is currently trading at a rich valuation of 6.5x FY24E EV/EBITDA. We reiterate our Neutral rating on the stock with a target price of INR300 (6x FY24 EV/EBITDA).

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