Hindustan Zinc: Strong prospects getting priced in | Business Standard News–23.07.2017

Hindustan Zinc’s performance in the June quarter may have been softer than its record March quarter numbers with zinc and lead prices seeing some correction due to weak Chinese data. But, the company’s overall prospects remain strong given the improved data for the month of June, which has led to a rebound in base metal prices in recent weeks.

Zinc prices on the London Metal Exchange (LME) averaged at $2,596 in the June quarter, which was 35 per cent higher year-on-year (y-o-y), but were 6.6 per cent lower sequentially. Average lead prices, too, were 26 per cent higher y-o-y at $2,161, but 5.1 per cent down sequentially. Hence overall realisations were to get softer. But, prices are inching up again with zinc around $2,730 and lead at $2,198.

On volumes, too, the company continues to grow well with mined metal production at 233,000 tonne increasing 84 per cent y-o-y in the June quarter, driving integrated lead and zinc production higher by 81 per cent y-o-y and silver production by 30 per cent. While this was also on a low base as mining plans in FY17 were such that the June 2016 quarter saw lower mined metal production, production growth still beat analysts’ estimates. Zinc volumes were 7 per cent ahead of estimates at Motilal Oswal Securities.

Growing production, despite slightly soft realisations sequentially, helped revenues from operations, at Rs 5,013 crore, beat Bloomberg consensus estimates of Rs 4,869 crore. Earnings before interest, tax, depreciation and amortisation (Ebitda), at Rs 2,404 crore, was lower than consensus estimates of Rs 2,585 crore. Net profit, at Rs1,876 crore, thus also fell short of estimates of Rs 2,004 crore.