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Performance on track; capex guidance increased

Hindustan Zinc reported 4Q EBITDA of INR42.6bn, above JMfe of INR39.4bn. The beat in EBITDA came on account of the company’s ability to maintain cost of production at USD 1,214 (USD 1,293 in 3Q). Key takeaways from the result - a) volume guidance for FY24 stands at 1,050-1,075 ktons / 725-750tons for refined metal and silver respectively b) CoP (without royalty) guidance for FY24 has been reduced to USD1,125-1,175 vs USD1,225- 1,275 in FY23 c) Zinc international acquisition remains under consideration with shareholder approval still awaited d) Fumer commissioning is now expected in 1QFY24 (4QFY23 earlier) on account of absence of Chinese experts due to Visa issues. Project capex guidance for FY24 has been increased to USD175-200mn vs USD125-150mn in FY23. Net debt as of 4Q stood at INR18bn vs a net cash position of INR114bn in 3Q. The company remains hopeful of achieving net cash position in FY24 on the back of cash flows generated from operations. We remain positive on HZL given its presence in the lower end of the global cost curve facilitated by high grade captive mines sufficient to meet requirements for decades, 100% captive power plants, sizeable scale, diversified revenue stream with increasing contribution from silver sales. Maintain BUY (refer exhi. 3).

* Lower CoP aided margins: The Company registered sequential increase of 8.2% in sales, primarily due to improved metal & silver volumes coinciding with higher zinc, lead & silver prices. Zinc CoP before royalty stood at US$1,214 (INR99.8k), down 6.1% QoQ. CoP declined on account of higher volumes, better grades, strong operational efficiencies, supported by softened coal and input commodity prices. COP for the full year was US$ 1,257 (INR 100.9k), an increase of 12.1% (20.8% higher in INR terms) YoY. Consequently, EBITDA for the quarter at INR42.6bn was up 14.8% QoQ. Sequential EBITDA improved primarily due to better revenue and reduced costs. Mined metal production for 4Q stood at 301 kt, up 18.6% QoQ on account of higher ore production and improved mined metal grades. The company’s outlook for FY24 stands at 1,050-1,075 ktpa mined / finished metal production. FY24 silver production is expected to be 725-750 tons.

* Capex guidance increased in FY24: The Company increased its project capex guidance for FY24 to USD 175-200mn (USD125-150mn for FY23). Mechanical installations of Line 1 have been completed at Hindustan Zinc Alloys with complete plant installation expected by 1QFY24. Rajpura Dariba Mill construction is in advance stage - commissioning expected by 1QFY24. In case of the Fumer plant, in absence of Chinese experts due to Visa issues, HZL team is working on commissioning with internal experts and online OEM support. Fumer commissioning is expected in Q1FY24. For the New Roaster at Debari, technology partner, OEC and OMC have been onboarded. EPC order placement is currently ongoing with partner lock in targeted in Q1 FY24. The company’s net debt position stood at INR18bn as at 4Q end.

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