Hindustan Zinc - Robust Domestic Demand, Focus On Value Added Products To Fuel Growth: Motilal Oswal
Volume momentum likely to remain intact.
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Motilal Oswal Report
Hindustan Zinc Ltd. is India’s largest and the world’s second largest integrated zinc producer and is one of the lowest cost producers of zinc globally.
Hindustan Zinc is a 64.92% subsidiary of Vedanta Ltd. and 29.54% of its stake is held by government.
It commands 80% market share in primary zinc market in India and operates the world’s largest UG zinc mine at Rampura Agucha along with mines at Sindesar Khurd, Rajpura Dariba, Zawar and Kayad. It has a total ore reserves of 173.5 million tonne and reserves and resources of 460.1 mt containing 30.8 mt of metal content (~6.6%).
Hindustan Zinc has total mined metal capacity of 1.2 mt and smelting capacity of 1.123 mt and is further ramping up its UG mines to reach a mined metal capacity of 1.35 mt and eventually 1.5 mt.
The company is all set to capture the growing domestic steel and automobile demand amid rapid expansion in infrastructure and construction, as well as improved standard of living and urbanization.
As India inches towards the 300 mt crude steel production target by FY30-31, the demand for galvanised steel is likely to outpace other metals. Hindustan Zinc has a strong focus on value added products. The share of VAP stands at ~20% of the total sales, which is expected to gradually rise to 24% by FY25.
While Hindustan Zinc is well placed, the stock trades at 6.1 times FY24E enterprise value/Ebitda and appears to be fully discounting the benefits.
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