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Power Cost Saving & Operating Leverage to Push HZL PAT at Rs 11,402 Cr by FY27: Ventura

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Power Cost Saving & Operating Leverage to Push HZL PAT at Rs 11,402 Cr by FY27: Ventura

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Brokerage Ventura Securities expects Hindustan Zinc Limited (HZL) to benefit from power cost savings and operating leverage that will push the profit after tax at the company to INR 11,402 crore by FY27. It has also emphasized HZL’s timely expansion in silver production capacities that will help the company given the exploding demand for the metal.

“Due to power cost saving measures and operating leverage, EBITDA and PAT are expected to reach INR 19,142 Cr and INR 11,402 Cr by FY27 respectively. Consequently, EBITDA/PAT margins are expected to improve to 51.5% (+430bps)/30.7% (+350bps) by FY27 respectively,” Ventura said in its report.

The brokerage expects HZL to turn net debt-free by FY26. It has initiated coverage on the company with a buy for a Discounted Cash Flow (DCF) methodology-based price target of 585 over the next 24 months representing a potential upside of 26.7% from the current CMP of Rs. 462.

Ventura has highlighted elements that will be favorable for HZL. “Global demand for base metals – zinc and lead is expected to grow at a CAGR of 6%/7% to 19.1million/13.3 million. Domestically, India is a net exporter of zinc while having a deficit in lead supplies. Both these circumstances are favourable to HZL. Silver is fast gaining traction for investment demand and its use cases in industrial applications is only rising. The timely expansion in silver production capacities augers well given the exploding demand,” it said.

HZL has planned capex of ~INR 16000 crore (including sustaining capex) for the period FY24-27 for funding the roaster plant at Debari, fumer and fertilizer plant at Chanderiya (sulphuric acid forward integration) and 450 MW renewable energy addition.

Ventura is also bullish on HZL’s expansion plans, expecting it to contribute to revenue growth. “HZL is expected to expand its mined production to 1.2 million tonnes in FY27 from 1 million tonnes with refined zinc/lead production increasing from 817/216 kt to 931/240 kt. Silver (by product of lead concentrate) is expected to increase from 746 to 800 tonnes,” the brokerage said in its report. 

“We expect revenue to grow at a CAGR of 9% to INR 37,152 cr during FY24-27E aided by capacity expansion and a strong demand outlook. Zinc/lead/silver/other sources (sulphuric acid and wind energy) revenue is expected to increase at a CAGR of 11% / 3% / 7% / 5% to INR 24,425/ 4,438/ 6,636/ 1,654 crore respectively,” it added.

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