Hindustan Zinc (HZL), part of the Vedanta Group, is gaining significant investor attention ahead of Diwali due to its robust performance, strategic expansion, and high dividend yield. The stock has surged over 60% year-to-date (YTD), outperforming Vedanta, which gained 18% on the BSE. Currently trading at ₹509.75 per share with a market cap of ₹2,15,385.64 crore, HZL has a target price of ₹540, as set by JM Financial, making it an appealing pick in the metal sector.
Key Financial and Operational Highlights
- Q2 FY25 Financial Performance:
- HZL reported a 22% year-over-year (YoY) revenue increase to ₹8,252 crore, bolstered by higher zinc and silver volumes along with improved pricing.
- Net profit before exceptional items reached ₹2,389 crore, reflecting a 38% YoY rise, with strong EBITDA growth supporting overall performance.
- The revenue boost benefited from a favorable dollar and increased silver volumes, though it was partly offset by lower lead prices.
- FY25 Production and Cost Guidance:
- HZL has maintained its production guidance at 1,075-1,100 tons for refined metal and 750-775 tons for silver, with cost of production (CoP) projected between $1,050 and $1,100 per ton, targeting the lower end.
- Key projects, including the 160 ktpa Debari Roaster and a new fertilizer facility, are scheduled for completion by Q4 FY25 and Q2 FY25, respectively.
- Expansion Plans and Demerger:
- HZL has announced plans to double its production capacity to 2 million tonnes, with a projected $2 billion (approximately ₹17,000 crore) investment over the coming years. This expansion would strengthen India’s zinc production capabilities, with HZL already working with consultants and exploring partnerships with mining firms.
- Additionally, the company is exploring a demerger to enhance shareholder value, a strategy that CEO Arun Misra has confirmed is under discussion with government authorities. HZL is committed to this approach, regardless of government disinvestment plans.
- Debt and Investment Position:
- The company’s net debt rose to ₹57 billion as of September 30, 2024, from ₹3 billion the previous quarter. Despite this increase, analysts remain optimistic about HZL’s position due to its cost-effective operations, extensive captive power resources, and high-quality mines that provide a long-term supply.
Analyst Recommendation
JM Financial has given HZL a “Buy” rating with a target price of ₹540 per share. The recommendation is based on HZL’s cost leadership, its ambitious expansion plans, high dividend yield, and an encouraging outlook in both the metal and silver markets. HZL is well-positioned to capitalize on these strengths, making it an attractive investment choice.
Disclaimer: This information is provided for educational and informational purposes only and should not be considered as financial or investment advice. Investments in the stock market are subject to market risks; please conduct thorough research or consult a financial advisor before making investment decisions.
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