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Revenue in line, beat on EBITDA; focuses on CoP

* Hindustan Zinc (HZ)’s revenue was INR86b (YoY/QoQ: +18%/+4%) vs. our estimate of INR82b. The growth was largely on account of higher zinc and silver prices and a strong dollar, marginally offset by lower metal volumes.

* EBITDA stood at INR45b (YoY/QoQ: +28%/+9%) against our estimate of INR41b, led by higher revenues and lower-than-expected cost of production (COP). EBITDA margin came in at 52.2% vs. 50% in 2QFY25.

* Zinc’s COP for 3QFY25 stood at USD1,041/t (INR 87,960/t), -5% YoY and -3% QoQ. The improvement was led by higher metal grades and better domestic coal availability with lower costs, which were further supported by increased renewable energy and higher acid realizations.

* APAT stood at INR27b (YoY/QoQ: +32%/ +15%) vs. our est. of INR23b. For 9MFY25, revenue grew 17%, EBITDA grew 26%, and APAT rose 30% YoY.

* Mined metal for 3QFY25 stood at 265kt, -2% YoY, with lower ore production at Agucha and SK mines, partly offset by improved mined metal grades and mill recovery. However, it rose 3% QoQ driven by higher mined metal grades and an increase in production at Agucha and Zawar mines.

* Total refined metal production was flat YoY at 259 kt and was marginally down QoQ due to a planned maintenance shutdown.

* The refined Zinc volume stood at 204kt (YoY/QoQ: flat / +3%) and the refined Lead volume stood at 55kt (YoY/QoQ: -2% /-13%), lower due to pyro plant operations on lead mode for longer duration.

* Silver volume stood at 160t (YoY/QoQ: -19%/ -13%) on account of lower silver output input from SK Mine.

Key management commentary

* For FY25, the management retained its mined metal production guidance of 1,100-1,125kt and refined metal production of 1,075-1,100kt

* The management maintained its zinc CoP guidance of USD1,050-1,100/t for FY25 and was confident in meeting the lower end of the band.

* Silver volume guidance for FY25 is expected to be in the range of 700-710 tonnes vs earlier guidance of 750-775 tonnes.

* Zinc COP stood at USD1,041/t in 3QFY25 vs USD1,071/t in Q2FY25. Management targets to exit at USD1,000/t by FY26 end and below USD1,000/t by the end of FY27.

Valuation and view

* The performance was largely in line with our estimates. The company continues to focus on improving production with tight cost control. We retain our earnings estimates and expect HZ to maintain its focus on profitability.

* At CMP, HZ trades at 7.5x FY27E EV/EBITDA, and we believe the current valuation prices in all positive factors. We reiterate our Neutral rating with a TP of INR460 (premised on 8x EV/EBITDA on FY27 estimates).

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