For 4QFY2011, Hindustan Zinc’s (HZL) net revenue at `3,197cr was substantially higher than our estimate of `2,724cr. Net profit at `1,771cr was also above our estimate of `1,368cr. The deviation was mainly due to higher-than-expected zinc, lead and silver sales volume and other income.
Impressive performance in 4QFY2011: HZL’s net revenue grew by 28.0% yoy and 22.9% qoq to `3,197cr on account of higher sales volume and realisation. Although lead volumes fell by 11.3% yoy to 16kt, zinc volumes grew by 28.6% yoy to 194kt (up 32.6% and 9.0%, respectively, on a sequential basis). Silver sales volume increased by 4.5% yoy and 50.1% qoq to 44,325kg, while zinc and lead concentrate sales stood at 48,000dmt. Silver realisation increased by 89.4% yoy and 24.9% qoq to `49,197/kg. Thus, led by strong top-line growth, EBITDA grew by 30.6% qoq and 27.1% yoy to `1,969cr, as margins expanded by 363bp qoq to 61.6%, though flat on a yoy basis. Further, other income grew by 125% yoy and 46.1% qoq to `302cr and tax rate came in lower at 16.9%, which resulted in net profit growing by 43.0% yoy and 37.4% qoq to `1,771cr.
Outlook and valuation: Currently, the stock is trading at 6.5x FY2012E and 5.2x FY2013E EV/EBITDA. HZL is expected to benefit from the expansion of zinc-lead smelting capacity and increased silver production. Further, HZL had a huge cash balance of `14,965cr as of March 31, 2011 (`35 per share). We maintain our Neutral rating on the stock.
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