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Systematix Research Report
Hindustan Zinc Ltd.'s Q2 FY24 revenue of Rs 66.2 billion (-20.6%/-6.9% YoY/QoQ) was in line with our estimate. Ebitda of Rs 31.4 billion -28.8%/-6.2% YoY/QoQ was 12% above our estimate due to lower power and fuel and raw material costs.
At 185 kilo tonne, zinc volumes were lower by 2.1%/11.5%% YoY/QoQ largely due to lower ore production at the Rampura Agucha and Kayad mines.
Zinc/lead prices averaged at $2,428/tonne (-25.9%/-4.5% YoY/QoQ) and $2,170/tonne (+9.8%/2.5% YoY/QoQ), respectively, during the quarter.
Silver prices averaged $23.6/Oz and were up 22.6% YoY but fell 2.5% QoQ. Before royalty, zinc's cost of production was $1,137/tonne (-9.7%/-4.8% YoY/QoQ), within the annual guidance of $1,125-1,175/tonne, due to improved grades across mines.
By H1 FY24, Hindustan Zinc has achieved 48% of its annual mined metal guidance (zinc plus Lead metal) of 1.05-1.075 million tonne for FY24, and ~49% of its silver production guidance.
Total borrowings have fallen by 4% to Rs 113.2 billinn from FY23 levels with a cash balance of Rs 112.6 billion. We have factored in mined metal production at 1.06 million tonne (+2.7% YoY) and silver production at 744 tonne (+4.1% YoY) for FY24.
We revise our FY24E/FY25E Ebitda downward by 25%/17% to account for lower metal prices partially offset by lower cost of production.
We value Hindustan Zinc at 7.5 times FY25E Ebitda and lower the target price to Rs 287/share (Rs 348/share earlier). Maintain 'Hold'.
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