Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
CMP: Rs 169 as of (May 22, 2020)
TP: Rs 187 (■) 12 months
Rating: HOLD (■) Upside: 10.5 %
India Equity Research | Metals & Mining
May 22, 2020
Result Update
Hindustan Zinc Refer to important disclosures at the end of this report
Difficult times ahead; Covid-19 fears outweigh strong dividend yield
Change in Estimates
EPS Chg FY21E/FY22E (%) -36/-26
Target Price change (%) -15%
Target Period (Months) 12
Previous Reco HOLD
Emkay vs Consensus
EPS Estimates
FY21E FY22E
Emkay 11.9 15.4
Consensus 15.5 18.0
Mean Consensus TP (12M) Rs 194
Stock Details
Bloomberg Code HZ IN
Face Value (Rs) 2
Shares outstanding (mn) 4,225
52 Week H/L 265 / 116
M Cap (Rs bn/USD bn) 715 / 9.46
Daily Avg Volume (nos.) 8,69,647
Daily Avg Turnover (US$ mn) 1.9
Shareholding Pattern Mar '20
Promoters 64.9%
FIIs 1.0%
DIIs 2.7%
Public and Others 31.4%
Price Performance
(%) 1M 3M 6M 12M
Absolute 1 (7) (21) (34)
Rel. to Nifty (1) 23 4 (15)
The company posted strong results but uncertain outlook guided management’s decision
to defer FY21 guidance by one quarter. Even though utilization level is 80% currently,
uncertainty due to Covid-19 has dented outlook in an otherwise strong quarter despite 10
days of shutdown.
Projects continued to be delayed as international travel ban interrupted movement of
specialists required for commissioning the projects. A 3-month delay with low capacity
utilization overall in Q1FY21 is likely to result in 9% decline in metal production in FY21.
We cut FY21/22 metal sales volume by 13%/4% and silver sales volume by 18%/13%. We
also cut Zinc LME price assumptions by 21%/20% and Lead LME by 30%/29% for FY21/22
as major economies struggle to boost demand.
Strong dividend yield expectation of c.9% for FY21/FY22 is the silver lining, in our view.
We maintain Hold rating but revise down FY21/22 EBITDA by 37%/26%, roll forward
valuation from Sep-21E to Mar-22E and reduce TP from Rs 200 to Rs187 with OW in EAP
due to dividend yield.
Relative price chart
Source: Bloomberg This report is solely produced by Emkay Global. The following person(s) are responsible for the production of the recommendation:
Vishal Chandak
+91 22 6612 1275
-40
-32
-24
-16
-8
0
100
135
170
205
240
275
May-19 Jul-19 Sep-19Nov-19 Jan-20 Mar-20May-20
%Rs
Hindustan Zinc (LHS) Rel to Nifty (RHS)
What did we like?
Strong operating performance despite shutdown in the last 10 days resulted in sharp
outperformance vs. our expectations. We note that management changed its strategy of
market mix from 70% domestic in pre-Covid times to 70% in exports currently to ensure the
company is able to sell its output despite its major domestic market not available due to
lockdown.
What we did not like?
We believe continued delay in the commissioning the projects is likely to result in a yoy decline
of about 9% in total mined metal production. The decline is also a result of 8 days of shutdown
in April, and lower utilization levels in April and May compared with the historical standards of
the company.
Outlook and valuations
We believe the fortunes of the commodities are strongly tied up to the opening up of
economies while containing the pandemic at the same time. With no clear signs of a cure and
looming threat of second wave on one hand, with strong dividend yield at CMP on other hand,
we maintain Hold with revised TP of Rs187 based on 6x Sep-22E EV/EBITDA. Key risks to
our call are: 1) recovery in global economies driving demand for zinc and hence upswing in
zinc prices; and 2) second wave of pandemic as economies open up, resulting in severe
economic downturn resulting in depressed LME prices.
Please see our sector model portfolio (Emkay Alpha Portfolio): Metals & Mining (Page 10)
Financial Snapshot (Standalone)
(Rs mn) FY19 FY20 FY21E FY22E FY23E
Revenue 2,11,180 1,85,610 1,55,370 2,06,240 2,45,819
EBITDA 1,06,700 88,470 73,914 96,028 1,13,191
EBITDA Margin (%) 50.5 47.7 47.6 46.6 46.0
APAT 79,560 68,050 50,230 65,054 77,263
EPS (Rs) 18.8 16.1 11.9 15.4 18.3
EPS (% chg) (12.0) (14.5) (26.2) 29.5 18.8
ROE (%) 22.9 18.4 12.8 16.9 19.7
P/E (x) 9.0 10.5 14.2 11.0 9.3
EV/EBITDA (x) 5.0 5.7 6.9 5.3 4.2
P/BV (x) 2.1 1.8 1.9 1.9 1.8
Source: Company, Emkay Research
Hindustan Zinc (HZ IN) India Equity Research | Result Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 22, 2020 | 2
Story in Charts
Exhibit 1: Mined Metal Production (kT)
Source: Company, Emkay Research
Exhibit 2: Sales volumes mix
Source: Company, Emkay Research
Exhibit 3: Dividend per Share (Rs)
Source: Company, Emkay Research
Exhibit 4: Cash & Cash Equivalents per Share (Rs)
Source: Company, Emkay Research
Exhibit 5: Zinc Inventory at multi-year low
Source: Company, Emkay Research
Exhibit 6: Lead inventory and LME prices
Source: Company, Emkay Research
Exhibit 7: HZL 1yr fwd P/B Ratio (x)
Source: Company, Emkay Research
Exhibit 8: HZL 1yr fwd EV/EBITDA (x)
Source: Company, Emkay Research
904811
960894 917
787
10351156
0
400
800
1200
1600
FY
16
FY
17
FY
18
FY
19
FY
20
FY
21E
FY
22E
FY
23E
211
217
190
193
200
210
172
162 187
177
168
168
172
173
36 4
7
34 40 45 5
0
42
49
54
52
48
44 42 48
247 264
224
233
245 260
214
211 2
41
229
215
212
214
220.2
100
150
200
250
300
Q3F
Y17
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
Zinc kt Lead kt Total Sales Vol kt
28 29
8
20
0
17 15 15
0
10
20
30
40
FY
16
FY
17
FY
18
FY
19
FY
20
FY
21E
FY
22E
FY
23E
DPS
8376
5346
53 51 5159
0
10
20
30
40
50
60
70
80
90
FY
16
FY
17
FY
18
FY
19
FY
20
FY
21E
FY
22E
FY
23E
0
200
400
600
800
1000
1200
1400
500
1,500
2,500
3,500
4,500
5,500
May' 9
0
Ma
y' 9
2
May' 9
4
Ma
y' 9
6
Ma
y' 9
8
Ma
y' 0
0
Ma
y' 0
2
Ma
y' 0
4
Ma
y' 0
6
Ma
y' 0
8
Ma
y' 1
0
Ma
y' 1
2
Ma
y' 1
4
Ma
y' 1
6
Ma
y' 1
8
Ma
y' 2
0
Zinc Inventory (kt, LHS) Zinc (US$/t, RHS)
555105155205255305355
300 800
1,300 1,800 2,300 2,800 3,300 3,800 4,300
Ma
y' 8
8
Ma
y' 9
0
Ma
y' 9
2
May' 9
4
Ma
y' 9
6
Ma
y' 9
8
Ma
y' 0
0
Ma
y' 0
2
Ma
y' 0
4
Ma
y' 0
6
Ma
y' 0
8
Ma
y' 1
0
Ma
y' 1
2
Ma
y' 1
4
Ma
y' 1
6
Ma
y' 1
8
Ma
y' 2
0
Lead Inventory (kt, LHS) Lead (US$/t, RHS)
0
1
2
3
4
5
Ma
y-0
6
Ma
y-0
7
Ma
y-0
8
Ma
y-0
9
Ma
y-1
0
Ma
y-1
1
May-1
2
Ma
y-1
3
Ma
y-1
4
Ma
y-1
5
Ma
y-1
6
Ma
y-1
7
May-1
8
Ma
y-1
9
Ma
y-2
0 0
2
4
6
8
10
12
14
Ma
y-0
6
Ma
y-0
7
Ma
y-0
8
Ma
y-0
9
Ma
y-1
0
Ma
y-1
1
Ma
y-1
2
Ma
y-1
3
Ma
y-1
4
Ma
y-1
5
Ma
y-1
6
Ma
y-1
7
Ma
y-1
8
Ma
y-1
9
Ma
y-2
0
Hindustan Zinc (HZ IN) India Equity Research | Result Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 22, 2020 | 3
Exhibit 9: Actual vs. Estimates (FY20)
Rs mn Estimates Variation
Actual Emkay Consensus Emkay Consensus
Total Revenue 185,610 193,897 188,956 -4% -2%
EBITDA 88,470 94,288 90,527 -6% -2%
EBITDA Margin (%) 48% 49% 48%
Emkay Net Profit 67,050 63,269 68,701 6% -2%
Source: Emkay Research, Bloomberg, Company
Exhibit 10: Quarterly Financials
Rs mn Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 YoY (%) QoQ (%) FY20 FY19 YoY (%)
Net sales 53,840 49,240 44610 46260 43210 -20% -7%
Other Op Income 1070 630 500 460 700 -35% 52%
Total Revenue 54,910 49,870 45,110 46,720 43,910 -20% -6% 1,85,610 2,11,180 -12%
Inventory Changes 250 -60 -140 -1,710 -1,000 -500% -42% -2,910 -640 355%
Employee Expense 2,130 1,820 1,920 2,010 1,140 -46% -43% 6,890 9,050 -24%
Power and Fuel 3,870 4,450 4,130 4,040 4,420 14% 9% 17,040 17,580 -3%
Mining Royalty 6,990 5,940 5,390 6,130 6,070 -13% -1% 23,530 26,280 -10%
Other Expenses 13,780 12,950 12,640 13,360 13,640 -1% 2% 52,590 25,386 107%
EBITDA 27,890 24,770 21,170 22,890 19,640 -30% -14% 88,470 1,06,700 -17%
Depreciation 5,530 5,340 5,950 5,970 5,530 0% -7% 22,790 18,830 21%
EBIT 22,360 19,430 15,220 16,920 14,110 -37% -17% 65,680 87,870 -25%
Other Income 5,390 4,290 5,900 4,450 4,700 -13% 6% 19,340 17,820 9%
Interest 510 290 250 420 160 -69% -62% 1120 1130 -1%
PBT 27,240 23,430 20,870 20,950 18,650 -32% -11% 83,900 1,04,560 -20%
Total Tax 7,120 5,780 60 4,750 5,260 -26% 11% 15,850 25,000 -37%
Current Tax 5,830 5,000 2,590 3,580 3,110 -47% -13% 14,280 22,200 -36%
Deferred Tax 1,290 780 -2,530 1,170 2,150 67% 84% 1570 2800 -44%
Reported PAT 20,120 17,650 20,810 16,200 12,940 -36% -20% 67050 78620 -15%
Reported EPS 4.76 4.18 4.93 3.83 3.17 -33% -17% 16.1 18.8 -14%
Source: Company, Emkay Research
Exhibit 11: Key Margins
Margins (%) Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 YoY QoQ FY20 FY19 YoY
EBIDTA 50.79 49.67 46.93 48.99 44.73 -606 bps -427 bps 47.66 50.53 -286 bps
EBIT 40.72 38.96 33.74 36.22 32.13 -859 bps -408 bps 35.39 41.61 -622 bps
EBT 49.61 46.98 46.26 44.84 42.47 -714 bps -237 bps 45.20 49.51 -431 bps
PAT 36.64 35.39 46.13 34.67 30.49 -615 bps -418 bps 36.66 37.67 -101 bps
Effective Tax rate 26.14 24.67 0.29 22.67 28.20 207 bps 553 bps 18.89 23.91 -502 bps
Source: Company, Emkay Research
Exhibit 12: Key Operating and Financial Metrics
Hindustan Zinc (HZ IN) India Equity Research | Result Update
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May 22, 2020 | 4
Production Voume (kt) Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 YoY (%) QoQ (%) FY20 FY19 YoY (%)
Mined metal content 245 219 210 219 197 -20% -10% 869.8 876 -0.7%
Refined Zinc 175 172 166 178 172.4 -1% -3% 688.4 664 3.7%
Refined Lead 53 48 44 41 49.4 -7% 20% 179.8 176 2.2%
Saleable Silver 191 159 134 149 168 -12% 13% 610 679 -10.2%
Sales Volume (kt) Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 YoY (%) QoQ (%) FY20 FY19 YoY (%)
Zinc Sales Volume 177 168 168 172 172.6 -2% 0% 688.4 698 -1%
Lead Sales Volume 52 48 44 42 47.6 -8% 13% 179.8 197 -9%
Total Metal Sales 229 215 212 214 220.2 -4% 3% 868.2 895 -3%
Silver Sales Volume 199 155 135 153 143.6 -28% -6% 610 687 -11%
Segment Revenue Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 YoY (%) QoQ (%) FY20 FY19 YoY (%)
Refined Zinc 36,890 35,100 30,510 31,650 29,200 -21% -8% 1,26,590 1,44,750 -13%
Refined Lead 8,090 6,840 6,720 6,520 6,920 -14% 6% 26,456 31,580 -16%
Silver 7,450 5,760 5,770 6,900 6,010 -19% -13% 25,493 25,690 -1%
Others 2,480 2,170 2,110 1,650 1,780 -28% 8% 8,179 9,160 -11%
Total Revenue 54,910 49,870 45,110 46,720 43,910 -20% -6% 1,86,717 2,11,180 -12%
Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 YoY (%) QoQ (%) FY20 FY19 YoY (%)
Zinc - Realization ($/t) 2,958 3,019 2,590 2,592 2,335 -21% -10% 2,627 2,968 -12%
Zinc - LME ($/t) 2,702 2,763 2,348 2,388 2,128 -21% -11% 2,402 2,743 -12%
Premium over LME - ($/t) 256 256 242 204 207 -19% 2% 225 225 0%
Lead - Realization ($/t) 2,208 2,054 2,182 2,186 2,007 -9% -8% 2,102 2,292 -8%
Lead - LME ($/t) 2,036 1,882 2,028 2,045 1,847 -9% -10% 1,952 2,121 -8%
Premium over LME - ($/t) 172 172 154 141 159 -7% 13% 150 171 -12%
CoP - Zinc (reported )(USD/t) 987 1,067 1,048 1,077 997 4% -7% 1,047 1,008 4%
CoP - Zinc (reported )(INR/t) 67,359 74,219 73,754 76,571 72,220 7% -6% 74,172 70,444 5%
Source: Company, Emkay Research
Hindustan Zinc (HZ IN) India Equity Research | Result Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 22, 2020 | 5
Highlights of the conference call
Production has increased substantially since Apr: Production was shut for last 10 days in
March as Zinc was not included in the ESMA. Compared to 40% utilization at mines and
80% utilization at smelter, current production at both mines and smelters are at 80-90%
levels. Production run rate of 1mt of mined metal achieved in Q4FY20. Adjusting for
shutdown of 10 days in March, the run rate is 1.12mt.
Costs: The company is targeting 5-10% reduction in costs for FY21 over FY20. Employee
cost was down 43% on a qoq basis on account of a reversal of annual incentives. However,
the company has not resorted to layoffs and is producing at 80% + utilization levels across
mines and smelters through higher automation/digitization while maintaining requisite
safeguards required for Covid-19.
Cost of Production (CoP) for was $997/t vs. $1077/t in Q3. This was also aided by a
reversal of c.Rs750-800mn on account of employee incentives due to plant shutdown in
March. Adjusting for this, the CoP for the quarter would be c.$1050/t. About 40% of its cost
is USD-linked which is largely for imported coal.
Inventory: The company is currently carrying inventory of 35kt of MIC vs. its normal trend
of about 20kt. The additional inventory is on account of shutdown in the last 10 days of Mar
2020.
Projects update: The smelter residual recovery plant to be operational by Q3, Raw zinc
oxide treatment plant by Q4. The fumer plant at Chanderiya has been deferred to May-20.
Zawar backfill plant also deferred to May-20 (previously both projects were expected by
Feb-20). Ore hauling at RA mines have started, post the commissioning of shaft.
FY21 Guidance: Due to the ongoing pandemic situation, the company has deferred its
production and capex guidance for FY21 to Q2FY21. In terms of growth capex, the
company highlighted that the growth capex of USD100-120mn is still pending. However, at
this point in time, the company is conserving its cash flows and shall take decision on the
capex a clarity on Covid-19 emerges.
Revenue mix: During the pre-Covid times, domestic was 74% of the revenue, which has
reversed in Covid times when exports constitute 70% of total volumes. With steel plants
returning to higher level of utilization levels, the company believes the domestic sales can
increase again.
Industry update: c.15% of the zinc mines supply to be impacted due to Covid-19. At
current LME price of $1950/t, nearly 15% of mines are carrying negative cash flows and if
situation persists, these mines might be shut. In LatAM countries, where large zinc mines
are located, resumption of mines can be delayed due to the impact of Covid-19.
Hindustan Zinc (HZ IN) India Equity Research | Result Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 22, 2020 | 6
Exhibit 13: Changes in Estimates
Financials (Rs bn) FY21 FY22 FY23
Old New %change Old New %change New
Revenue 226.9 155.4 -31.5% 246.6 206.2 -16.4% 245.8
EBITDA 117.7 73.9 -37.2% 130.3 96.0 -26.3% 113.2
PAT 79.1 50.2 -36.5% 87.5 65.1 -25.7% 77.3
EPS 18.7 11.9 -36.4% 20.7 15.4 -25.6% 18.3
LME
Zinc ($/t) 2,500 1,969 -21.3% 2,500 2,000 -20.0% 2,100
Lead ($/t) 2,400 1,688 -29.7% 2,400 1,700 -29.2% 1,800
FX (USD/INR 70 76 8.6% 70 75 7.1% 76
Sales Volume
Zinc (kt) 773 688 -10.9% 842 827 -1.7% 907
Lead (kt) 220 180 -18.3% 233 208 -10.7% 249
Total Refined Metal (kt) 993 868 -12.6% 1,075 1,035 -3.7% 1,156
Silver (t) 748 610 -18.4% 816 707 -13.3% 872
Source: Company, Emkay Research
Exhibit 14: Valuation
Valuation UoM FY22E
EBITDA Rs bn 96
Multiple x 6
EV Rs bn 576
Net Debt Rs bn -215
Implied Market cap Rs bn 792
No. of Shares mn 4,225
TP Rs 187
Source: Company, Emkay Research
Exhibit 15: Peer Comparison
Bloomberg Consensus M. Cap PE (x) EV/EBITDA (x) PB (x) ROE (x)
Estimates USD
mn
CY19/
FY20
CY20/
FY21
CY21/
FY22
CY19/
FY20
CY20/
FY21
CY21/
FY22
CY19/
FY20
CY20/
FY21
CY21/
FY22
CY19/
FY20
CY20/
FY21
CY21/
FY22
Hindustan Zinc Ltd 9,809 8.8 11.6 16.5 5.70 6.93 5.32 1.77 1.86 1.86 18.41 12.77 16.92
Korea Zinc Co Ltd 5,797 10.74 11.34 10.71 4.87 4.52 4.22 1.04 0.98 0.93 9.94 8.92 8.97
Teck Resources Ltd 4,877 4.44 18.18 6.14 2.45 5.51 4.04 0.30 0.31 0.30 6.94 1.60 4.27
Yunnan Chihong
Zinc 5,797 10.74 11.34 10.71 4.87 4.52 4.22 1.04 0.98 0.93 9.94 8.92 8.97
Glencore PLC 24,526 10.83 40.02 13.44 4.58 5.66 4.52 0.60 0.61 0.62 4.03 1.63 3.18
Source: Company, Emkay Research
Hindustan Zinc (HZ IN) India Equity Research | Result Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 22, 2020 | 7
Key Financials (Standalone)
Income Statement
Y/E Mar (Rs mn) FY19 FY20 FY21E FY22E FY23E
Revenue 2,11,180 1,85,610 1,55,370 2,06,240 2,45,819
Expenditure 1,04,480 97,140 81,456 1,10,213 1,32,628
EBITDA 1,06,700 88,470 73,914 96,028 1,13,191
Depreciation 18,830 22,790 22,215 24,332 26,449
EBIT 87,870 65,680 51,699 71,695 86,742
Other Income 17,820 19,340 15,274 15,043 16,276
Interest expenses 1,130 1,120 0 0 0
PBT 1,04,560 83,900 66,973 86,738 1,03,017
Tax 25,000 15,850 16,743 21,685 25,754
Extraordinary Items 0 0 0 0 0
Minority Int./Income from Assoc. 0 0 0 0 0
Reported Net Income 79,560 68,050 50,230 65,054 77,263
Adjusted PAT 79,560 68,050 50,230 65,054 77,263
Balance Sheet
Y/E Mar (Rs mn) FY19 FY20 FY21E FY22E FY23E
Equity share capital 8,450 8,450 8,450 8,450 8,450
Reserves & surplus 3,27,600 3,94,650 3,75,162 3,76,836 3,90,719
Net worth 3,36,050 4,03,100 3,83,612 3,85,286 3,99,169
Minority Interest 0 0 0 0 0
Loan Funds 9,640 10,900 10,900 10,900 10,900
Net deferred tax liability (19,250) (18,220) (18,220) (18,220) (18,220)
Total Liabilities 3,26,440 3,95,780 3,76,292 3,77,966 3,91,849
Net block 1,66,940 1,78,380 1,56,435 1,51,903 1,45,253
Investment 0 0 0 0 0
Current Assets 2,15,850 2,48,260 2,31,912 2,35,286 2,74,242
Cash & bank balance 1,95,110 2,22,070 2,14,322 2,15,469 2,49,547
Other Current Assets 3,180 3,680 2,331 3,094 3,687
Current liabilities & Provision 62,960 60,320 57,625 64,794 73,217
Net current assets 1,52,890 1,87,940 1,74,287 1,70,493 2,01,025
Misc. exp 0 0 0 0 0
Total Assets 3,42,370 3,91,210 3,65,612 3,67,286 3,81,169
Cash Flow
Y/E Mar (Rs mn) FY19 FY20 FY21E FY22E FY23E
PBT (Ex-Other income) (NI+Dep) 1,04,560 83,900 66,973 86,738 1,03,017
Other Non-Cash items (690) (970) 0 0 0
Chg in working cap (3,760) (11,190) 5,905 4,941 3,545
Operating Cashflow 77,820 66,190 78,350 94,327 1,07,257
Capital expenditure (43,930) (36,370) (10,270) (29,800) (9,800)
Free Cash Flow 33,890 29,820 68,080 64,527 97,457
Investments 0 (3,56,120) 0 0 0
Other Investing Cash Flow 7,340 5,190 0 0 0
Investing Cashflow (36,590) (26,480) 4,730 (14,800) (9,800)
Equity Capital Raised 0 0 0 0 0
Loans Taken / (Repaid) 25,380 0 (6,110) 0 0
Dividend paid (incl tax) (84,500) 0 (69,718) (63,380) (63,380)
Other Financing Cash Flow (18,330) (19,240) 0 0 0
Financing Cashflow (78,580) (20,740) (75,828) (63,380) (63,380)
Net chg in cash (37,350) 18,970 7,252 16,147 34,077
Opening cash position 19,640 230 18,980 26,232 42,379
Closing cash position (17,710) 19,200 26,232 42,379 76,457
Source: Company, Emkay Research
Hindustan Zinc (HZ IN) India Equity Research | Result Update
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May 22, 2020 | 8
Key Ratios
Profitability (%) FY19 FY20 FY21E FY22E FY23E
EBITDA Margin 50.5 47.7 47.6 46.6 46.0
EBIT Margin 41.6 35.4 33.3 34.8 35.3
Effective Tax Rate 23.9 18.9 25.0 25.0 25.0
Net Margin 37.7 36.7 32.3 31.5 31.4
ROCE 31.4 23.5 17.3 23.0 26.8
ROE 22.9 18.4 12.8 16.9 19.7
RoIC 84.3 48.8 39.7 64.2 85.2
Per Share Data (Rs) FY19 FY20 FY21E FY22E FY23E
EPS 18.8 16.1 11.9 15.4 18.3
CEPS 23.3 21.5 17.1 21.2 24.5
BVPS 79.5 95.4 90.8 91.2 94.5
DPS 20.0 0.0 16.5 15.0 15.0
Valuations (x) FY19 FY20 FY21E FY22E FY23E
PER 9.0 10.5 14.2 11.0 9.3
P/CEPS 7.3 7.9 9.9 8.0 6.9
P/BV 2.1 1.8 1.9 1.9 1.8
EV / Sales 2.5 2.7 3.3 2.5 1.9
EV / EBITDA 5.0 5.7 6.9 5.3 4.2
Dividend Yield (%) 11.8 0.0 9.7 8.9 8.9
Gearing Ratio (x) FY19 FY20 FY21E FY22E FY23E
Net Debt/ Equity (0.6) (0.5) (0.5) (0.5) (0.6)
Net Debt/EBIDTA (1.7) (2.4) (2.8) (2.1) (2.1)
Working Cap Cycle (days) (73.0) (67.1) (94.1) (79.6) (72.0)
Growth (%) FY19 FY20 FY21E FY22E FY23E
Revenue (4.4) (12.1) (16.3) 32.7 19.2
EBITDA (13.1) (17.1) (16.5) 29.9 17.9
EBIT (18.6) (25.3) (21.3) 38.7 21.0
PAT (14.2) (14.5) (26.2) 29.5 18.8
Quarterly (Rs mn) Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20
Revenue 54,910 49,870 45,110 46,720 43,910
EBITDA 27,890 24,770 21,170 22,890 19,640
EBITDA Margin (%) 50.8 49.7 46.9 49.0 44.7
PAT 20,120 17,650 20,330 16,200 12,940
EPS (Rs) 4.8 4.2 4.8 3.8 3.1
Source: Company, Emkay Research
Shareholding Pattern (%) Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
Promoters 64.9 64.9 64.9 64.9 64.9
FIIs 1.5 1.4 1.3 1.1 1.0
DIIs 2.4 2.6 2.6 2.7 2.7
Public and Others 31.1 31.2 31.2 31.3 31.4
Source: Capitaline
Hindustan Zinc (HZ IN) India Equity Research | Result Update
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May 22, 2020 | 9
RECOMMENDATION HISTORY TABLE
Date Closing
Price TP
Period (months)
Rating Analyst
22-Jan-20 209 220 12m Hold Vishal Chandak
30-Oct-19 213 242 12m Hold Vishal Chandak
19-Jul-19 220 247 12m Hold Vishal Chandak
03-May-19 275 285 12m Hold Vishal Chandak
21-Jan-19 268 270 12m Hold Vishal Chandak
22-Oct-18 282 294 12m Hold kamal Sahoo
23-Jul-18 268 325 12m Hold Goutam Chakraborty
08-May-18 301 325 12m Hold Goutam Chakraborty
02-May-18 308 325 12m Hold Goutam Chakraborty
01-Mar-18 316 309 12m Hold Goutam Chakraborty
01-Nov-17 325 309 12m Hold Goutam Chakraborty
23-Oct-17 319 309 12m Hold Goutam Chakraborty
11-Sep-17 309 298 12m Hold Goutam Chakraborty
05-Sep-17 304 298 12m Hold Goutam Chakraborty
20-Jul-17 280 293 12m Hold Goutam Chakraborty
Source: Company, Emkay Research
RECOMMENDATION HISTORY CHART
Source: Bloomberg, Company, Emkay Research
120
166
212
258
304
350
24
-Ma
y-1
7
21
-No
v-1
7
21
-Ma
y-1
8
18
-No
v-1
8
18
-Ma
y-1
9
15
-No
v-1
9
14
-Ma
y-2
0
BUY Hold SellAccumulate Reduce PriceTarget Price
Hindustan Zinc (HZ IN) India Equity Research | Result Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 22, 2020| 10
Emkay Alpha Portfolio – Metals & Mining
EAP sector portfolio
Company Name BSE200 Weight
EAP Weight
OW/UW (%)
OW/UW (bps)
EAP Weight (Normalised)
Metals & Mining 2.27 2.23 -1% -3 100.00
Coal India 0.46 0.43 -5% -2 19.17
Hindalco 0.36 0.40 10% 4 17.63
Hindustan Zinc 0.07 0.08 10% 1 3.60
Jindal Stainless 0.00 0.00 NA 0 0.00
Jindal Stainless Hisar 0.00 0.00 NA 0 0.00
JSW Steel 0.36 0.39 10% 4 17.37
MOIL 0.00 0.00 NA 0 0.00
National Aluminium Co 0.05 0.05 -10% -1 2.05
NMDC 0.13 0.13 0% 0 5.55
SAIL 0.06 0.05 -10% -1 2.33
Tata Steel 0.44 0.33 -25% -11 14.65
Vedanta 0.33 0.37 10% 3 16.20
Cash 0.00 0.03 NA 3 1.44
Source: Emkay Research
* Not under coverage: Equal Weight
High Conviction/Strong Over Weight High Conviction/Strong Under Weight
Sector portfolio NAV
Base Latest
1-Apr-19 19-Aug-19 20-Nov-19 19-Feb-20 20-Apr-20 20-May-20
EAP - Metals & Mining 100.0 77.6 79.8 80.1 55.5 54.2
BSE200 Neutral Weighted Portfolio (ETF) 100.0 77.5 80.0 80.4 54.1 52.7
*Performance measurement base date 1st April 2019
Source: Emkay Research
NAV chart
Source: Emkay Research
Please see our model portfolio (Emkay Alpha Portfolio): SMID
Please see our model portfolio (Emkay Alpha Portfolio): Nifty
“Emkay Alpha Portfolio – SMID and Nifty are a supporting document to the Emkay Alpha
Portfolios Report and is updated on regular intervals”
45
57
69
81
93
105
Apr-19 May-19 Jul-19 Sep-19 Oct-19 Dec-19 Feb-20 Mar-20 May-20
NAV
EAP - Metals & Mining BSE200 Neutral Weighted Portfolio (ETF)
Analyst: Vishal Chandak
Contact Details
+91 22 6612 1275
Sector
Metals and Mining
Analyst bio
Vishal Chandak is a CA and MBA
(Finance). He brings in over 16 years of
experience, including seven years in the
corporate side, with balance being on
both the buy side and sell side. Currently,
his team tracks 12 stocks in the Metals
and Mining space.
Hindustan Zinc (HZ IN) India Equity Research | Result Update
Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
May 22, 2020| 11
Emkay Rating Distribution
Ratings Expected Return within the next 12-18 months.
BUY Over 15%
HOLD Between -5% to 15%
SELL Below -5%
Completed Date: 22 May 2020 09:21:36 (SGT) Dissemination Date: 22 May 2020 09:22:36 (SGT)
Sources for all charts and tables are Emkay Research unless otherwise specified.
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Hindustan Zinc (HZ IN) India Equity Research | Result Update
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May 22, 2020| 12
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Hindustan Zinc (HZ IN) India Equity Research | Result Update
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May 22, 2020| 13
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