Brokerages have given thumbs up to both Hindustan Zinc Ltd. and majority stake owner Vedanta Ltd., after the latter's ‘Zinc Day' meet last week outlining current business prospects, the ongoing expansion, and the medium-term growth outlook.
Most of the brokerages at the August 30 event reiterated their buy rating for Vedanta, while increasing the target price for the stock.
The metal maker guided for international production in the range of 240-260 kilo tonnes in FY19, compared with 150-160 kilo tonnes in FY18e from zinc assets in Africa. This rise would be driven by incremental volumes from 250-kilo-tonne Gamsberg project, which is to be commissioned by the mid-calendar year 2018 at the cost of $400 million.
Hindustan Zinc
Axis Capital
- Upgraded the stock to ‘Buy' from ‘Hold'
- Target price revised to Rs 336 from Rs 257 earlier
- Maintain earnings before interest, tax, depreciation and amortisation (EBITDA) estimates, but cut earnings per share (EPS) estimates
- EPS estimates cut to factor in higher tax rate of 25 percent versus 20 percent earlier
- Zinc prices to remain elevated due to supply deficit and no new large mining
Motilal Oswal
- Maintained neutral rating but hiked target price to Rs 332 from Rs 301 earlier
- Increased company's consolidated EBITDA by 8-12 percent to Rs 16,200-Rs 17,100 crore for FY19-20E
- After a hiatus of six years, company's mine production to grow 27 percent
- Management targets to double silver production to 1,000 tonnes
Vedanta
Axis Capital
- Maintained ‘Buy' rating but hiked target price to Rs 362 from Rs 310 earlier
- Reduced FY18/19 EPS estimate to Rs 25-32 from Rs 26-34 earlier
- Estimated capital expenditure for Gamsberg reduced to $600 million from $400 million
HSBC
- Maintained ‘Buy' rating and increased target price to Rs 370 from Rs 340
- Increased EBITDA estimates by 2-6 percent for FY18-20e
- Increased aluminium/iron ore price estimates by 3-6 percent/8-10 percent over CY17-19
- Vedanta is one of our preferred stocks in the Indian metals sector
Motilal Oswal
- Maintained ‘Buy' rating, hiked target price to Rs 361 per share from Rs 316
- Increased company's consolidated EBITDA by 9-11 percent to Rs 34,900-Rs 37,900 crore for FY19/20E
- Strong-term outlook for zinc LME has also turned bullish
- Aluminum prices trade stronger on supply-side measures by China
- Gamsberg phase 1 on track for full 250 kt production in FY20E
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