Reduce Hindustan Zinc; target of Rs 260: Prabhudas Lilladher

Prabhudas Lilladher recommended Reduce rating on Hindustan Zinc with a target price of Rs 260 in its research report dated January 21, 2021.

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Prabhudas Lilladher’s research report on Hindustan Zinc

Hindustan Zinc (HZ) reported EBITDA tad below our estimates by 3% due to lower volumes. While, earnings beat consensus estimates by 6%. HZ missed its guidance on volumes and ore grade over last 3-4 years due to weaker than assessed ore grade. Ore grade has fallen by ~30% in last 5 years due to lower grade of new mines and reduced share of Rampura Agucha (RA) mines. As the new shafts at both RA and Sindesar Khurd (SK) mines commenced operations, quality of operations would improve with better visibility on production and costs. However, ore grade would continue to remain volatile due to increase in share of mines having low grade of ore. Given the sharp run-up in stock price and unattractive valuations,

Outlook

we maintain Reduce rating with TP of Rs260 based on EV/EBITDA of 6x FY22e.

For all recommendations report, click here

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