Hind Zinc
A higher output and rupee depreciation worked in favour of Hindustan Zinc. In Q2FY14, mined metal production was up 16% and this was due to higher production at Rampura Agucha and restarting of Zawar mines. Production of integrated saleable zinc metal production rose by 28%, production of integrated saleable refined lead rose 29% and that of silver was up 14%. Rupee depreciation augurs well for the company and this is what helped boost the topline in Q1, which otherwise on the back of lower price realizations could have slumped. Thus in terms of revenue earned for each of these – zinc net sales rose 39% (YoY), lead rose 33% but silver dropped 14%. Net sales came in at Rs.3521 crore, up 25%. EBTDA at Rs.1904 crore was up 28%. Net profit for the quarter came in at Rs.1640 crore, up 7%.
In terms of realizations, zinc was down 1% at US$1895/MT, lead was up 7% at US$2102/MT and silver was down sharply by 28% at US$21.4/oz. The better realizations on lead and a 13% rupee depreciation helped undo the falling realization of zinc and silver. Regarding its expansion projects, Rampura Agucha underground mine project is operational via ramps and commercial production will ramp up in Q3 and Q4 of FY 2014. The Kayad mine project will also commence commercial production in the current fiscal year. As on 30th September 2013, the Company had cash and cash equivalents of Rs. 23,632 crore.
The big trigger for the stock can only be the news of stake sale from Govt in Hind Zinc and Balco. The Govt holds a residual stake of 29.5% in the company, which is in the non-promoter category. The company, which is a subsidiary of the Vedanta group, through Sterlite Industries, holds 64.92% stake as at 30th Sept 2013. The Vedanta group has more than evinced its desire to buy the residual stake from the Govt but no decision has yet been made despite all legal hurdles now cleared.
Looking ahead, as stated by our Editor, Mr.SP Tulsian, stake sale by Govt to Vedanta would be the best option. He says, “There is no point in selling in open market. I don’t think that there is appetite of Rs 14,000-15,000 crore even taking the present valuations in the market because that will decrease the value of the stake held by the government. Stay invested.”