Company Update Hindustan Zinc by pengxiuhui


									  Company Update

Hindustan Zinc
                                                                       Net income soars…
Recommendation                :         Marketperformer
                                                                       Hindustan Zinc’s revenue grew by 97.87 percent to Rs. 2544.89
CMP                           :         Rs 1223
Target                        :         Rs 1360
                                                                       crore, as a result of increased output and better realizations.
Upside Potential              :         11.2%                          Refined zinc and lead production increased by 1.0 percent YoY,
                                                                       while silver production was up by 8.5 percent in the comparable
Sector                        :         Metals                         period. However, bulk of the growth came through increased
                                                                       metal price realizations. The cost of metal production increased
Bloomberg code                :         HZ.IN                          due to higher coal costs and employee costs; apart from an
Reuters Code                  :         HZNC.BO                        increase in stripping ratio, which means higher waste per tonne of
                                                                       ore mined. EBITDA margin improved 989 basis points YoY; while
                                                                       declining by 203 basis points sequentially. Interest expenses
Issued Equity Capital (Cr. Shrs)        :          42.25
                                                                       increased four-fold to Rs.27.68 crores. Overall, net income grew by
Mkt. Cap (Rs. in Crs)                   :          51675
                                                                       124.67 percent to Rs. 1238.99 crores.
Major Shareholders
Promoters (%)                           :          64.92%
Free Float (%)                          :          35.08%              War Chest …
Avg. Daily Vol. (‘000)                  :          64.34               Hindustan Zinc is a cash-rich company with hardly any debt. It
                                                                       has a Rs. 11,900 crore war chest to spend and is eyeing
                                                                       acquisitions in India and abroad. When worked out; the
  Background: Hindustan Zinc Limited
                                                                       companyʹs cash balance is equivalent to Rs. 281 per share, which
  (Hind Zinc) is a subsidiary of Sterlite
  Industries India Ltd, part of the Vedanta                            could be used by the management to exploit inorganic growth
  Group.     The     company’s       product                           opportunities or enhance dividend payout to shareholders.
  portfolio covers zinc, lead, silver,
  cadmium and sulphuric acid. Hind Zinc                                Expansion on track …
  is the only integrated zinc manufacturer                             In the previous quarter, Hindustan zinc commissioned a 0.21
  in India with current zinc smelting                                  MTPA zinc smelter a full three months in advance. Construction
  capacity of around 6,70,000 TPA and                                  activity is at full swing for the 0.1 MTPA lead smelter and the 160
  lead smelting capacity of 85,000. It has                             MW captive power plant at Dariba. It is scheduled for completion
  a domestic market share of 61% in zinc                               by Q2FY11. The Sindesar Khurd mine project is also on schedule
  and 11% in lead.                                                     for commissioning from the current quarter. Also, the companyʹs
                                                                       ore production capacity was expanded from 3.45 MTPA to 7.4
                                                                       MTPA currently. Hindustan zinc is planning to enhance this
                                                                       further to 10 MTPA to match the expansion of the smelters. Post
Rohith Thomas Mathew +91 44 3000 7361                                  completion of these projects, Hindustan Zinc would be the                                        world’s largest integrated zinc-lead producer with a total smelting
                                                                       capacity of 1 million tonne.

                                                                                                          Net Div
   FY March                                                   Net                                          Yield    EV/EBITDA
   (Rs Crore)        Turnover      EBITDA         PBT        Profit     EPS (Rs)    BVPS (Rs)    PE (X)     (%)         (X)     ROE (%)
   FY10A              8138.90      4792.00       5014.11    4041.41       95.65      430.65      12.79    0.41%       8.84       22%
   FY11E             10824.74      6711.34       7176.80    5597.90      132.34      557.99      9.24     0.41%       5.93       24%
   FY12E             11365.97      6,933.24      7,387.88   5,762.55     136.23      689.22       8.98    0.41%       5.36       20%
                      Result Summary & Comments Q4FY10

   Particulars      Q4                            Q3
   (in Rs. Crs)    FY10     Q4FY09     YoY       FY10      QoQ             Comments

   Net Sales      2544.89   1288.93   97.44%    2249.14   13.15%    Higher price realizations
   Expenses        996.71    707.62   40.85%     863.04   15.49%

   EBITDA         1548.18    581.31   166.33%   1386.10   11.69%
   Depreciation    100.64     75.03    34.13%     81.72   23.15%
   income          134.46    194.22   -30.77%    131.87     1.96%
   interest         27.68      4.86   469.55%      7.66   261.36%
   PBT            1554.32    695.64   123.44%   1428.59     8.80%
   Tax             315.33    144.17   118.72%    279.94    12.64%
   EOI               0.00      0.00                0.00
   PAT            1238.99    551.47   124.67%   1148.65    7.86%

   EBITDA                                                           Margin slips on higher
   margin         60.83%    45.10%              61.63%              stripping ratio
   Tax rate       20.29%    20.72%              19.60%
   Net profit
   margin         48.69%    42.79%              51.07%


The economic meltdown in late 2008 led to base metal production cuts across the globe. As
supply subsided, prices of non-ferrous metals began to firm up. Zinc prices have more than
doubled since then. The zinc and lead surplus in the global market is expected to shrink
further in 2010 and we believe a recovering global economy could support prices going
forward. We like Hindustan Zinc for its high quality of mines, cost leadership due to
integrated business model, ongoing expansion projects and a strong balance sheet. HZL could
benefit from firm zinc prices, strong volume growth and increased silver production. We
continue to rate Hindustan Zinc a MARKETPERFORMER for an upgraded price target of
DBS Cholamandalam Securites Limited
Member: BSE, NSE, MSE
Regd. Office: Dare House, 2 (Old # 234) N.S.C. Bose Road, Chennai – 600 001.
Website :
E-mail id -
To open Trading Account SMS CDWM TA to 55050

                LOCATION                                      BEM                    PHONE NUMBERS                                                   E-MAIL ID
AHMEDABAD                                    Mr.Mehul M Min                          079 - 64500318/19                     
BANGALORE                                                                            080- 41503340/41
                                             Mr. Krishna Kumar R M                                                         
CHANDIGARH                                   Mr. Vishal Arora                        0172 - 26248051                       
                                             Mr. Baskaran S                          044 - 26198919/16                     
                                             Mr. M Sundaresan                        044- 25307306                         
COCHIN                                       Mr. Preethi Damiyan                     0484- 3073859                         
COIMBATORE                                   Mr. Mohan V N                           0422- 4292041                         
DELHI                                        Mr. Kunal kaushish                      011- 66134224/25                      
                                             Mr. Anupum Periwal                      040- 64550572/77                      
                                             Mr. Srinivasa Reddy D V                 040- 23316567/68                      
                                             Mr. Kumar Gaurav                                                              
KOLKATA                                                                              033- 44103638/3639
                                             Mr.Subhrodeep Chatterjee                                                      
                                             Mr. Navneet Kedia                       022- 66156591                         
MUMBAI                                       Ms Shweta Shantaram Padhey              022- 66574000                         
                                             Ms. Sheetal Bheda                       022 -22153610                         
PATNA                                        Mr.Sanjay Kumar                         0612 - 2500008                        
PUNE                                         Mr. Sujit Arvind Gaidhani               020 - 30264811/12                     
RANCHI                                       Mr. Sanjiv Kumar                        0651 - 6453496                        

                                                                            REGIONAL EQUITY MANAGER
CHENNAI                                      Mr. Lakshmanan T S P                 9840019701                               
EAST & WEST                                  Mr. Ananthanarayan                   9930103070                               

NORTH                                        Mr. Ajay Kumar Minocha                  9717007227                            
SOUTH                                        Mr. Shankar P V                         9840494132                            

Mr. Radhakrishnan.R                          Manager Research / Technicals           044-30007353                          
Mr. Alagappan A                              Financial Services                      044-30007363                          
Mr. Balajee Tirupati                         Infrastructure                          044-30007364                          
Mr. Kumar Rahul Chauhan                      Sugar, Capital Goods                    044-30007364                          
Mr. Rohith Thomas Mathew                     Metals, Mining, Cement                  044-30007361                          
Mr. Ramasubramaniam P                        Telecom, Capital Goods                  044-30007360                          
Ms. Sheetal Aggarwal                         Information Technology                  044-30007365                          

Mr Guruswamy Raj                             Manager-Compliance                                                            

The research analyst who is primarily responsible for this report certifies that: (1) all of the views expressed in this report accurately reflect his or her personal
opinions about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly
related to the specific recommendations or views expressed in this report. This report has been prepared on the basis of information that is already available in
publicly accessible media or developed through analysis of DBS Cholamandalam Securities Limited. DBS Cholamandalam Securities Limited makes every effort to
use reliable, comprehensive information, but we make no representation that it is accurate or complete.
The views expressed are those of the analyst and the Company may or may not subscribe to all the views expressed therein DBS Cholamandalam Securities Limited reserves the
right to make modifications and alterations to this statement as may be required from time to time without any prior approval. DBS Cholamandalam Securities Limited, its affiliates,
directors and employees may from time to time, effect or have effected an own account transaction in or deal as agent in or for the securities mentioned in this report. The recipient
should take this into account before interpreting the report.

This report is for private circulation and for information purposes only. It does not provide individually tailor-made investment advice and has been prepared without regard to any
specific investment objectives, financial situation, or any particular needs of any of the persons who receive it. All investors may not find the securities discussed in this report to be
suitable. DBS Cholamandalam Securities Limited recommends that investors independently evaluate particular investments and strategies. Investors should seek the advice of a
financial advisor with regard to the appropriateness of investing in any securities / investment strategies recommended in this report. The appropriateness of a particular investment
or strategy will depend on an investor’s individual preference. Past performance is not necessarily a guide to future performance. Estimates of future prospects are based on
assumptions that may not be realized. . Re-publication or redistribution in any form, in whole or in part, is prohibited.

STOCK RATINGS : Outperformer: > 20% upside over the next 12 months; Marketperformer: trade within a +/-20% range over the next 12 months; Underperformer: > 20% downside
over the next 12 months.

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