Hindustan Zinc tumbles as power, input costs drag Q3 profit

Motilal Oswal Financial Services has a ‘neutral’ call on the stock with a target price of Rs 378. The stock is trading at a rich valuation of 6.7x FY24 EV/EBITDA, it says

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Hindustan Zinc opened almost 9 percent lower on January 20, a day after the company posted a 20 percent year-on-year drop in net profit for the December quarter, dragged down by lower topline and operating income.

At 10 am, the stock was quoting at Rs 353, down 6.4 percent, on the National Stock Exchange. Trading volumes at 3 million shares were significantly higher than the 20-day average of 810,430.

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The company’s revenue from operations also fell 2.71 percent YoY to Rs 7,628 crore from Rs 7,841 crore in the corresponding quarter of the previous financial year. Earnings before interest, taxes, depreciation and amortization (EBITDA) fell 15.2 percent to Rs 3,707 crore.

The drop in revenue was on account of lower LME coinciding with lower refined metal and silver volumes partially offset by favourable exchange rates and gains from strategic hedging. Power and fuel costs at around Rs 1000 crore, were up by 43 percent YoY and 2 percent QoQ, the company said.

The company will buy Vedanta Limited’s international zinc assets held by Zinc Ventures for a cash consideration of $2,981 million. This will give Hindustan Zinc access to a resource base of 35 MT with over 30 years of mine life.

“It will help Hindustan Zinc ramp up from 1.2 MT capacity to 2MT+ capacity, while giving access to countries in Africa, Europe, and North America,” domestic brokerage Motilal Oswal Financial Services said.

The brokerage has a “neutral” rating on the stock with a target price of Rs 378 apiece. At current levels, the stock is trading at a rich valuation of 6.7x FY24 EV/EBITDA, it said.

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