HINDUSTAN ZINC
Reco price: Rs 868
Current market price: 934
Target price: Rs 950
Upside: 1.7%
Brokerage: Angel Broking
On the back of improved demand outlook and prices, the brokerage has upgraded its 2009-10 and 2010-11 EPS estimates for Hindustan Zinc by 3 per cent and 11.7 per cent, respectively. The company has posted a mere 1.6 per cent growth in revenue to Rs 1,818 crore for September 2009 quarter, which was lower than estimates. Sales grew primarily on account of the increase in zinc and lead realisations, besides an 11 per cent depreciation in the rupee’s value. Notably, refined zinc and lead realisations grew 16.6 per cent and 9.3 per cent y-o-y, respectively, during the quarter.
On the operating front as well, EBITDA margins improved by 430 basis points to 59.1 per cent y-o-y mainly due to higher sales volumes and realisations of refined zinc and silver. Fall in various expenses also helped improve margins. Hindustan Zinc’s net profit fell marginally by 2.6 per cent to Rs 935 crore on account of lower other income (down 15 per cent y-o-y) and higher tax rate. The brokerage has upgraded the stock to ‘accumulate’ valuing the stock at 5.5 times its 2010-11 estimated enterprise value (EV)/EBITDA.
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