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Performance in line; CoP to remain under control

* Hindustan Zinc’s (HZ) 4QFY24 revenue stood at INR75b (down 11% YoY) vs. our est. of INR80b. The sequential revenue growth was driven by better zinc volumes, which offset lower lead & silver volumes and lower metal prices.

* EBITDA stood at INR36b (-14% YoY/+4% QoQ), in line with our est. of INR36b. EBITDA margin was flat QoQ at 48.3% (vs. our est. of 45%). EBITDA declined YoY, mainly on account of lower revenue, which was partly offset by cost improvement.

* The CoP stood at USD1,051/t (INR87,284), the lowest in the last 11 quarters and the fifth consecutive quarter of improvement. Cost improvement was driven by better grades and lower coal and input prices.

* In 4QFY24, APAT stood at INR20b (-21% YoY/flat QoQ) and was in line with our est. of INR19.4b. Full-year APAT stood at INR77b (-26% YoY).

* Mined metal volume in 4QFY24 stood at 299kt (-1% YoY/+10% QoQ), driven by higher ore production across mines and improved mined metal grades.

* Refined zinc volume stood at 220kt (+2% YoY/+8% QoQ) and refined lead volume was 52kt (-4% YoY/-7% QoQ). Silver volume came in at 189t (+4% YoY/-4% QoQ) in 4QFY24.

* For FY24, mined metal volumes increased by 2% YoY to 1079kt. Refined zinc volume was flat YoY at 817kt, while lead volume grew 2% YoY to 216kt.

Operational guidance for FY25

* For FY25, the management expects mined metal production of 1,100- 1,125kt and refined metal production of 1,075-1,100 kt.

* Silver production is expected to be around 750-775mt.

* Domestic zinc demand is likely to remain strong, driven by the govt.’s focus on infrastructure development and manufacturing output.

* The management expects zinc’s cost of production to be at USD1,050- 1,100/t in FY25. For FY25, capex is pegged at USD270-325m.

* Once the alloy facility is operational, it will increase the total VAP to 25% from the current 18-20%.

Valuation and view

* The performance has been largely in line with our estimates. The company continues to focus on improving production with tight cost control. To account for lower CoP ahead and an improved demand outlook, we have increased our FY25/FY26 EBITDA estimates by 11%/10%.

* HZ currently trades at 7x FY26E EV/EBITDA and we believe all positive factors are priced in at the current levels. We reiterate our Neutral rating on the stock with a revised TP of INR370 (premised on 6.5x FY26E EV/EBITDA).

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SEBI Registration number is INH000000412