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In-line performance; dividend play

Hindustan Zinc reported 4Q EBITDA of INR49.6bn, in line with JMfe. Key takeaways from the result - a) volume guidance for FY23 remains muted at 1,000-1,025 ktons / 700-725tons for refined metal and silver respectively b) CoP (without royalty) guidance for FY23 stands at USD1,125-1,175 as against 4Q CoP (without royalty) of USD1,136 c) 15% volumes have been hedged above ~USD4k d) consent to establish obtained by Hindustan Zinc Alloys to establish 30 kt plant while Rajpura Dariba Mill revamping for 1.1 mn ton underway - commissioning expected by 3QFY23 and e) Fumer plant commissioning expected by 1QFY23 with visa process in advanced stages for the technical experts. Project capex guidance for FY23 now stands at USD125-150mn. Net cash as of 4Q stood at INR170bn – INR40/sh and the company declared dividend of INR18/sh during FY22. 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 and strong balance sheet / high dividend pay-out. We revise FY23/24 earnings / fair value upwards as we factor in higher LME assumption (refer exhi.3&4). Maintain BUY (refer exhi. 5).

Highest quarterly Revenue and EBITDA since transition to UG mining: The Company registered sequential increase of 10.1% in sales, primarily due to higher zinc volumes/zinc LME prices as well as favourable exchange rates. This was partially offset by lower lead and silver volumes. Zinc COP before royalty stood at US$1,136 (INR85.4k), down 1% QoQ. The COP for the full year was US$ 1,122 (INR 83,5k), up 17.6% YoY, impacted by higher coal prices & input commodity inflation, partially offset by higher volume, better Sulphuric Acid realizations & improved recoveries. Consequently, EBITDA for the quarter at INR49.6bn was up 13.5% QoQ. Mined metal production for 4Q stood at 295 kt, up 2.6% YoY on account of higher ore production at Rajpura Dariba, Sindesar Khurd & Rampura Agucha mines. Full year mined metal production stood at 1.01mn tons, up 4.6% YoY.

Project guidance revised upwards; ESG focus intensifies: The Company has provided project capex guidance of USD125-150mn for FY23 as against USD100mn for FY22. Hindustan Zinc Alloys has obtained consent to establish 30 kt plant while Rajpura Dariba Mill revamping for 1.1 mn ton is underway - commissioning expected by 3QFY23. Fumer plant is expected to be commissioned by 1QFY23. The company ranked in top 100 global companies by Global Sustainability Magazine and has received board approval to undertake long-term captive renewable power development plan up to a capacity of 200 MW. The company has guided 1,000-1,025 ktpa mined / finished metal production. FY23 silver production is expected to be 700-725 tons. The company’s net cash position stood at INR170bn as at end 4Q

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