Hindustan Zinc Q3 Results Review - Inline; Cost Efficiency Helps Improve Margins: Systematix

Systematix Research Report

Hindustan Zinc Ltd.’s Q3 FY24 revenue of Rs 73.1 billion (-9.8%/+7.6% YoY/QoQ) was marginally below our estimate. Ebitda of Rs 35.2 billion -5.0%/+12.2% YoY/QoQ was in line with our estimate.

Ebitda margin during the quarter improved by 269 basis points/239 bps YoY/QoQ to 49.8%. At 203 kt, zinc volumes were lower by 3.3% YoY but increased 9.7% QoQ largely due to better grades.

Zinc/lead prices averaged at $2,498/tonne (-16.8%/+2.9% YoY/QoQ) and $2,123/tonne (-1.5%/-2.2% YoY/QoQ), respectively, during the quarter.

Silver prices averaged $23.2/Oz and were up 7.8% YoY but fell 1.4% QoQ.

Before royalty, zinc’s cost of production was $1,095/tonne (improvement of 15.3%/3.7% YoY/QoQ), within the annual guidance of $1,125-1,175/tonne, on account of higher volume, softened coal prices and linkage availability, and better grades.

For nine month-FY24, Zinc CoP ex royalty was $1,142/tonne. By 9M FY24, Hindustan Zinc has achieved 75% of its annual mined metal guidance (zinc + Lead metal) of 1.05-1.075 mt for FY24, and ~76% of its silver production guidance.

We have factored in mined metal production at 1.06 mt (+2.7% YoY) and silver production at 744 tonne (+4.1% YoY) for FY24.

We keep our estimates unchanged and value Hindustan Zinc at 7.5 times FY25E Ebitda and revise the target price marginally lower to Rs 284/share (Rs 287/share earlier) accounting for a lower cash level as of December-23. Maintain 'Hold'.

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