Hindustan Zinc Ltd's Q3FY19 standalone net profit declines 3.8% yoy to Rs2,211cr: Beats Estimates

The company’s standalone revenue stood at Rs5,540cr, down 6.5% yoy but up 16% qoq

Jan 21, 2019 03:01 IST India Infoline Research Team

Hindustan Zinc Ltd Q3FY19

Standalone Results Q3FY19: (Rs. in cr)

Q3FY19 YoY (%)
Revenue 5,540 [6.5]
EBITDA 2,838 [12.5]
EBITDA Margin (%) 51.2 [355]
Net Profit (adjusted) 2,211 [3.8]
***EBITDA margin change is bps

Hindustan Zinc reported a mild beat in its Q3FY19 results, with Net Profit and EBITDA margins coming ahead of expectations despite the lower revenues. Revenue fell by 6.5% yoy to Rs5,540cr (expectation Rs5,566cr). EBITDA stood at Rs2,838cr, down 12.5% yoy against estimates of Rs2,813cr. EBIDTA margin fell by 355bps yoy to 51.2%. Net Profit stood at Rs2,211cr against an estimate of Rs1,995cr.
  • Mined metal production stood at 247kt in Q3FY19, up 3% yoy. Mined metal production rose due to ongoing ramp up in underground mining and improvement in ore grades.
  • Refined zinc production stood at 188kt in Q3FY19, down 6% yoy but up 16% qoq. The sequential improvement for zinc was due to higher mine output as well as improved metal availability.
  • Refined lead production stood at 54kt in Q3FY19, up 18% yoy. Lead production increased due to higher mine output as well as higher smelter production.
  • Refined silver production stood at 178MT, up 34% yoy. This was due to higher lead production as well as better silver grades.
  • Cost of production for Zinc (before royalty) stood at Rs71,855 per MT, up 9% yoy but down 1% qoq. The sequential reduction in cost of production was due to a fall in fuel prices and higher volumes.
  • The overall production for mined metal and zinc-lead production in FY19 could be slightly higher than production in FY18. Silver production is expected at 650-700MT for FY19. Cost per tonne (before royalty) for 2HFY19 is expected at $950-975 per tonne.
  • Capex guidance for FY19 stands at $350mn for FY19. Capex guidance for FY19 had earlier been stated at $400-450mn. This indicates a slowdown in production ramp up

Result Comment
The result was slightly better than expected as improved grades and lower fuel costs helped boost margins. However, given the weak macro environment and soft pricing for base metals, we see volatility in the stock.

Concall highlights
  • Global zinc inventory levels are at their lowest in the past decade, at four days of demand. Thus, the management is confident that zinc prices are likely to rise, possibly to levels seen at the begining of 2018.
  • Management is confident of meeting CoP per tonne guidance given: (1) falling diesel prices, (2) improved coal linkage, and (3) higher production volumes.
  • Ore grade for the quarter stood at 8.2%, up from 7.6% in Q2FY19.
  • Capex guidance for FY19 has been lowered to $350mn due to delay in commissioning of shafts.

Technical View:

Hindustan Zinc Ltd is currently trading at Rs268.15, down by 4.25 points, or 1.56%, from its previous close of Rs272.40 on the BSE. The scrip opened at Rs274 and has touched a high and low of Rs274.75 and Rs265.10, respectively. So far, 22,13,344 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 200-DMA.

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