Report

INITIATING COVERAGE
31 MAR 2016
Hindustan Zinc
BUY
INDUSTRY
METALS
CMP (as on 30 Mar 2016) Rs 175
Target Price
Rs 195
Nifty
7,735
Sensex
25,339
KEY STOCK DATA

Bloomberg
HZ IN
No. of Shares (mn)
4,225
MCap (Rsbn) / ($ mn)
740/11,172
6m avg traded value (Rsmn)
173
STOCK PERFORMANCE (%)

52 Week high / low
Rs 181 / 116
3M
6M
12M
Absolute (%)
19.6
26.7
9.2
Relative (%)
22.6
29.8
18.6
SHAREHOLDING PATTERN (%)

Promoters
64.92
Institutions
3.45
Public & Others

Source : BSE
Ankur Kulshrestha
ankur.kulshrestha@hdfcsec.com
+91-22-6171-7346
Anuj Shah
anuj.shah@hdfcsec.com
+91-22-6171-7321
31.63
Silver to offset flat-lining Zn

Hindustan Zinc is likely to benefit from the zinc (Zn)
industrys improving fundamentals. Despite the
current weakness, Zn is expected to head into a
structural deficit as large sources of supply go offline.
HZLs silver volumes will improve as Sindesar Khurd
(SK) ramps up to fill the gap created by Rampura
Agucha (RA), which is moving from opencast
operations to underground. Valuations are
compelling despite the weakness in Zn price in the
medium term. The one-off Rs 24 dividend acts as
icing on the cake.
We initiate with a BUY and a TP of Rs 195 (5.5x FY18
EV/EBITDA, including dividend of Rs 24).
Investment arguments
Zinc (Zn) is headed into a structural deficit mainly
because of the recent/upcoming mine closures

(Lisheen, Century) and production cuts announced
by miners (Glencore, Nyrstar). Increasing
galvanised steel output in China is expected to
drive demand in the near and medium term,
despite overall weakness in steel output. Zn
inventories (LME + SHFE) have fallen ~14% over
CY15 alone and are at a six-year low.
Long-term support for industry fundamentals may
come from the fact that at current prices, new

mine development is not remunerative. Nyrstar,
the largest Zn refiner, assesses that Zn price of Rs
US$ 2,500/t (~US$ 2,220 in real terms) is required
to incentivise new mine development.
HZL, the worlds fourth-largest Zn producer and
second-largest miner, operates some of the lowest

cost Zn assets globally. It is currently transitioning
its largest mine, the Rampura Agucha (RA) opencast mine, to underground mining. To make up for
lower volumes, Sindesar Khurd (SK) is being
ramped up.
Due to higher silver content in the ore at SK mine
(182 g/t in P+P reserves vs. ~50 at RA), HZL is

expected to gradually ramp up its silver output.
Given the lower attributable costs (mostly refining
of lead concentrates), HZL enjoys high EBIT
margins in the silver business (~85% in 9MFY16).
Outlook
and view: On flattish EBITDA

expectations, HZL trades at 6.2/5.3x FY17/18
EV/EBITDA. The valuations are reasonable and will
not appear stretched even if Zn prices remain
depressed in the medium term. Increasing silver
exposure helps offset the flat-lining Zn output.
Financial Summary
(Rs bn)
Net Sales
EBITDA
PAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)
FY14
134.1
69.6
69.0
16.3
10.7
7.2
19.8
FY15
145.1
74.2
81.8
19.4
9.0
6.3
20.2
FY16E
142.0
71.2
81.3
19.2
9.1
5.9
20.0
FY17E
156.7
79.5
76.0
18.0
9.7
6.2
18.7
FY18E
163.8
82.3
81.3
19.2
9.1
5.3
17.4
Source: Company, HDFC sec Inst Research
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
HINDUSTAN ZINC : INITIATING COVERAGE
Zn: Headed into structural deficit

Mined metal production (~13.6 mT in CY15E) has
kept pace with the end use (13.9mT).
Led by mine closures and

production cuts, global supply
is expected to remain tight
Chinese Zn demand is expected

to remain strong owing to
increasing usage of galvanised
steel
Metal production (CAGR CY10-15: 1.7%) has

barely kept up with usage (CAGR CY10-15: 1.9%).
World Refined Zinc Supply And Usage 2010-2015

Mn T
Mine Prodn
Metal Prodn
Metal Usage
CY11 CY12 CY13 CY14

12.7 13.1 13.3 13.5
2.2% 3.8% 1.0% 1.7%
13.1 12.5 13.1 13.5
1.4% -4.2% 4.9% 2.8%
12.7 12.3 13.2 13.7
0%
-3%
7% 4.1%
CY15 CY16E
13.4
13.8
0.3% 1.8%
14.0
14.2
3.7% 1.6%
13.8
14.3
1.1% 3.3%
Near-term forecasts predict market deficit, as

China ups galvanised steel usage
In the near term, Zn mine production is forecast
to increase ~1.8% (ILZSG forecast for CY16),

driven by higher output from China. Ex-China
production is expected to decline 1.8% owing to
mine closures.
Significant Zn operations reached the end of
their mine life recently (Century in Aug-15,

which produced ~3.5% of the global supply in
2014, and Lisheen in Nov-15, which produced
~1.0%).
Horsehead Holding Corp, a large US Zn

producer filed for bankruptcy in February
2016.
Source: ILZSG, HDFC sec Inst Research
ILZSG expects Zn industry to

move into deficit in 2016
Urbanisation in China to drive demand
Forecast Large Drops In Zn Supply
While global steel demand is likely to stagnate
Mine
Country
Operator
Century
Lisheen
Skorpion
Pomorzarny
Australia
Ireland
Namibia
Poland
MMG
Vedanta
Vedanta
KGHM
(worldsteel expects 0.7% growth in CY16 after a

2.8% decline in CY15), Zn demand may outpace.
This is on account of lower proportion of
galvanised steel output in China (~5% of crude

steel in 2014) vs. developed economies (~20% in
US), which is likely to trend higher, driving
incremental Zn demand. Moreover, bulk of the
zinc demand in China came from galvanizing
(~57% in CY15) which is expected to grow.
China will continue to remain the dominant
driving force as galvanised sheet usage in cars,

consumer durables and construction activity is
expected to grow.
Capacity
(kTPA)
500
170
150
70
Likely
closure
2015
2015
2016
2017
Source: Company, ILZSG, HDFC sec Inst Research
Global production of refined zinc metal in 2015 is
forecast to rise by 1.6% to 14.2 mT. An

anticipated increase in South Korea, along with
Mexico and Namibia, will be partially offset by
reductions in the Netherlands.
ILZSG forecasts demand to rise by 3.3% to 14.4
mT in 2016, driven by a 4.9% increase in China,

mainly as a result of increasing galvanised steel
output.
Page | 2
The Zn industry is expected to move from a

surplus of ~88 kT in 2015 to a deficit of 152kT in
2016.
Current Zn prices are not

remunerative enough to spur
new mine development, will
restrict future supplies
Production cuts announced by Glencore (500 kT),
Per Metal Bulletin (via Bloomberg), recent
Chinese smelter (500kT) and Nyrstar (mine

suspensions) will add further to the deficit.
negotiations for Zn treatment charges between

miners and refiners indicate high level
uncertainty regarding Zn ore prices.
LME and SHFE stocks fell by 106 kT (14%) during
Teck and Korea Zinc signed an agreement for zinc
2015 and this

availability of Zn.
underlines
the
tightening
Unremunerative prices to disrupt future supply
concentrates supply in 2016, with the TC set at

US$203/t.
Nyrstar, the worlds largest refined zinc
producer, estimates that the current price levels

are below incentive price for new mine
development. This implies that only a small
percentage of probable projects will be viable
and achieve commercial production, hence
restricting large capacity additions in the future.
It estimates Zn price of US$ 2,500/t (real terms:
~US$ 2,200) required to incentivise new mine

development.
2,800
>50% upside forecast in

coming years
2,600
2,400
Teck and Glencore settled the basis price at

US$1,500/t and TCs at US$188.
Escalators are 3% up for price range of

US$1,500-2,000/t, 9% for $2,000-2,500/t,
8% for $2,500-3,000/t, 5% for $3,0003,750/t.
(US$1,500-3,000/t)
points
to
uncertainty in future Zn prices.
$/tn
3,000
The basis price was US$2,000/t, with

escalators: 3% down for prices of
US$1,500-2,000/t, 9% up for US$2,0002,500/t, 8% for US$2,500-3,000/t, 5% for
US$3,000-3,750/t.
The wide range seen in the TC basis pricing
Current Zn Prices Not Remunerative Enough
significant
$2,467
2,200
2,000
1,800
LT real price: 2,184
1,600
1,400
Forecast
Spot price
20
19
18
17
16
15
14
13
12
11
1,200
10
Driven by expectations of a
deficit, Zn has outperformed
other base metals, with
exchange stocks at a 6-year
low
Wide-range in Zn basis pricing points to

uncertainty
Source: Nyrstar, Consensus Economics, HDFC sec Inst Research
Page | 3
Favourably poised vs. other base metals
Given a favourable outlook on demand-supply,
Zn stocks (LME +SHFE) are at a six-year low as
Zn Has Outperformed Other Base Metals
LME + SHFE Stocks At a Six-year Low
Zinc has outperformed all other base metals in

the past 2-3 years.
Zn
Cu
Al
the market moves into structural deficit.
LME+SHFE Stock Levels
Pb
120.0
2,000,000
mt
Zn Price
$/tn
110.0
2,500
1,500,000
100.0
3,000
2,000
90.0
1,000,000
80.0
1,500
70.0
500,000
60.0
50.0
1,000
500
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Dec-15
Jun-15
Dec-14
Jun-14
Dec-13
Jul-13
Jan-13
Page | 4
HZL : Company Overview

Reserves And Resources
Ore Reserve
Proved and probable
Grade %
FY15
Rampur Agucha (RA) is the

most important mine, with
highest zinc/lead grade
Sindesar Khurd (SK) ramp up is

likely to replace some of the
declining volumes from RA
Million
mT
12.7
36.8
32.2
9.6
Zinc
RAM (OC)
13.1
RAM (UG)
14.4
Sindesar Khurd
4.5
Rajpura Dariba
6.4
Bamnia Kalan
Zawar
9.6
3.4
Kayad
7.3
9.6
Total
108.2
9.3
Lead
1.9
1.8
3.1
1.6
1.8
1.4
2.2
Mineral resource
Measured and Indicated
Grade %
g/t Million
g/t Million
Zinc
Lead
Silver
mT
Silver
mT
54
61
18.3
15
2
61
35.2
182
28.5
4.8
2.7
130
45.3
63
22.7
6.8
2.3
67
24.3
5.4
4.5
1.6
66
12.2
33
25
4.8
1.8
42
49.2
30
0.2
13.6
2
36
0.6
92 100.2
7.1
2.2
78
166.8
Inferred
Grade %
Zinc
Lead
g/t
Silver
9.9
3.8
6.6
3.8
4.9
7.1
5.8
2.1
2.5
1.9
1.8
2.6
1
2.3
62
109
92
56
50
16
75
Map Of Operations
Page | 5
Company overview (Contd)
HZL is the 2nd-largest company by mined metal

and the 4th largest by Zn/Pb produced globally.
Global Zn/Pb Miners
% Of Captive Sourced Concentrates

Refined Zinc (T)
kT, CY15
1,445
800,000
658
101.0%
100.0%
99.0%
500,000
540
400,000
234
98.0%
300,000
97.0%
FY15
FY14
FY13
FY12
Ore Mined (mTPA)
Votorantim
Hindustan
Zinc
Glencore
Source: Company, Nyrstar, HDFC sec Inst Research

Note: Korea Zinc and Votorantim Nos from CY14
It is also amongst the lowest cost producers for
zinc globally, comfortably in the top decile. This
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
-
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
mTPA
FY15
200
FY10
400
Sindesar Khurd
Zawar
Bamnia Kalan
FY14
597
600
Rampura Agucha
Rajpura Dariba
Kayad
% Share of Rampura Agucha
FY13
821
FY12
1,058
800
Korea Zinc
FY11
It is also the pre-eminent source of contained

zinc for HZL (~83% of zinc mined metal from RA).
1,000
Nyrstar
FY10
Rampura Agucha (RA), is worlds largest Zn mine.
FY11
1,091
95.0%
kT, CY15
1,115
96.0%
100,000
FY09
Nyrstar
MMG Ltd
Teck
Hindusta
n Zinc
200,000
Global Zn/Pb Smelters
Nearly fully integrated

operations and low cost of
operations put it comfortably
in the top decile globally
kTPA
600,000

Note: Contained Zn in mined metal indicated
1,200
Integrated Zinc (% of total)
700,000
969
Glencore
Hindustan Zinc is the secondlargest miner and fourthlargest by refined Zn

production
1,600
1,400
1,200
1,000
800
600
400
200
-
is owing to its fully integrated operations (full

sourcing of concentrates from own mines).
Page | 6
HZL is shifting to U/G mining at RA and this is
expected to ramp up over the course of the next

4-5 years. This will accompany a drop in O/C
production from the RA mine.
The next important mine is Sindesar-Khurd (SK),
Grid power
Thermal Power (Captive)
4,000
Fuel oil
% Share of Captive power
100%
mn kWh
which will make up for the shortfall at RA. While

the Zn content is low, this is more than offset by
the high silver content in the ore at SK.
3,000
95%
2,000
90%
Ore Reserve
Proved and probable
Grade (%)
Million
mT
Zinc
Lead g/t Silver
32.2
4.5
3.1
182
20.4
4.6
2.6
155
1,000
85%
with increased production largely from U/G

mining.
HZL has also systematically invested in upgrading

its power and fuel integration and is now self
sufficient in power (consumption at ~4,100
units/t).
FY15
FY14
FY13
FY12
FY11
FY10
Sulphuric Acid Revenues As % Of Total Revenues

6.0%
4.8%
5.0%
3.0%
3.9%
3.8%
4.0%
2.9%
3.3%
2.4%
2.0%
1.0%
FY15
HZL is targeting 1.2 mT of mined metals by 2019,
manufacturing. HZ has 1.25 mTPA of sulphuric

acid manufacturing capacity. Sulphuric acid
revenues (typically offset against operating
costs) have contributed to ~3-4% of the total
revenues.
FY14
mining, it is expected that the overall mining

cost for the company will increase. However,
the HZL management claims the costs will not
be drastically higher than the current
production costs.
Sulphuric acid is a key byproduct of Zn
FY13
Given the higher stripping costs in U/G vs. O/C
FY12
80%
FY11
FY15
FY14
FY10
Sindesar Khurd
SK mine ramp up will lead to

higher silver volumes
Electricity Consumption
Source: Company, HDFC sec Inst Research, as Indicated in IFRS

disclosure by Vedanta
Page | 7
Further, with ~Rs 290bn in net cash, HZL offsets
Family silver
Hindustan Zinc is the largest contributor to
Vedantas EBITDA. It contributed ~43% in FY15,

which went up to ~46% in 9MFY16. This is
partially attributable to lower crude prices, which
have driven down contribution from Cairn India.
Significant strategic
component of Vedanta Group
especially from cash flow
perspective
the substantial borrowings in other group

companies, on a consolidation basis.
However, access to cash is restricted till the issue

of GoI sale of 29.5% stake in HZL is resolved. The
Supreme Court stayed the sale on a plea by an
employee union (National Confederation of
Officers Association) in January 2016.
HZL Accounted For ~46% Of Group EBITDA In 9MFY16

2015
9M 2016
HZL
42.6
Others
57.4
Others
54.1
HZL
45.9
Vedanta Limited Net Debt/(Cash) Position

Company
Vedanta Limited Standalone
Zinc India
Zinc International
Cairn India
BALCO
Talwandi Sabo
Twin Star Mauritius Holdings Limited and Others
Vedanta Limited Consolidated
Debt
42,645
64
5,949
7,440
24,854
80,952
31st December 2015

Cash
3,055
28,214
673
18,643
25
8
67
50,685
Net Debt
39,590
(28,214)
(609)
(18,643)
5,924
7,432
24,787
30,267
Page | 8
P/E (Rolling 1-year forward

Average
-1 SD
EV/EBITDA
+1 SD
Average
+1 SD
-1 SD
12.00
11.00
10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Aug-12
Feb-13
Aug-13
Feb-14
Aug-14
Feb-15
Aug-15
Feb-16
Current valuations not

demanding either in historical
context or relative to peers
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
-
P/E
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Aug-12
Feb-13
Aug-13
Feb-14
Aug-14
Feb-15
Aug-15
Feb-16
EV/EBITDA (Rolling 1-year Fwd)
Peer Valuations
Company
MCap
USD mn
EV
USD mn
KOREA ZINC
TECK RESOURCES
NYRSTAR NV
HINDUSTAN ZINC
7,895
4,515
720
10,874
6,424
10,284
1,547
7,172
EV/EBITDA (x)
CY16E
CY17E
7.2
6.6
8.4
7.2
4.9
3.7
6.2
5.3
P/E (x)
CY16E
14.1
NM
NM
9.7
CY17E
12.6
39.0
9.6
9.1
EBITDA margin (%)

CY16E
CY17E
17.9
18.1
22.5
25.5
9.4
10.4
50.7
50.2
Source: Company, Bloomberg, HDFC sec Inst Research
Page | 9
Key Assumptions
We have built in flattish Zn

prices for FY17E/18E while
building an improvement in
silver
Volumes
Zinc (kT)
Lead (kT)
Silver (T)
Average realizations
Zinc (Rs/T)
Lead (Rs/T)
Silver (US$/oz)
LME-assumptions (US$/ton)
Zinc (Rs/T)
Lead (Rs/T)
Silver (US$/oz)
Rs/US$ rate
2012
2013
2014
2015
2016E
2017E
2018E
759
99
242
677
125
408
749
130
388
734
135
328
787
145
453
819
158
492
819
158
535
2,386
2,679
35.6
2,315
2,644
32.1
2,362
2,658
23.4
2,670
2,512
20.0
2,225
2,250
16.8
2,225
2,300
18.2
2,283
2,500
19.3
2,100
2,266
35.5
48.0
1,948
2,112
30.5
54.4
1,909
2,092
21.5
60.5
2,178
2,024
18.2
61.1
1,800
1,750
14.9
65.5
1,800
1,800
16.3
68.0
1,850
2,000
17.4
68.0
Page | 10
Income Statement
Year ending Mar (Rs mn)
FY14
Net sales
134,059
Growth %
5.6
Material and Mining Exps
55,153
Employee Expenses
6,801
SG&A Expenses
3,129
Other operating exps
1,663
Operating profits
67,314
Operating Profit Margin(%)
50.2
Other operating income
2,301
EBITDA
69,615
EBITDA %
51.9
EBITDA Growth %
6.5
Depreciation
7,846
EBIT
61,769
Other Income (including EO
18,377
items)
Interest
449
PBT
79,697
Tax
10,651
RPAT
69,046
APAT
69,046
APAT Growth (%)
0.1
Adjusted EPS (Rs.)
16.3
EPS Growth (%)
0.1
Balance Sheet
FY15
145,113
8.2
59,854
8,689
3,192
1,955
71,423
49.2
2,772
74,195
51.1
6.6
6,442
67,753
FY16E
142,013
(2.1)
59,698
8,800
3,492
2,053
67,970
47.9
3,234
71,204
50.1
(4.0)
6,934
64,271
FY17E
156,697
10.3
64,938
9,680
3,813
2,155
76,110
48.6
3,393
79,504
50.7
11.7
8,059
71,445
FY18E
163,805
4.5
68,085
10,648
4,004
2,263
78,806
48.1
3,465
82,271
50.2
3.5
8,959
73,312
28,183
28,330
22,576
27,305
235
95,701
13,921
81,780
81,780
18.4
19.4
18.4
235
92,366
11,084
81,282
81,282
(0.6)
19.2
(0.6)
235
93,786
17,819
75,967
75,967
(6.5)
18.0
(6.5)
235
100,382
19,073
81,310
81,310
7.0
19.2
7.0

FY14
SOURCES OF FUNDS
Share Capital
8,451
Reserves
365,725
Total Shareholders Funds
374,176
Deferred Taxes
16,581
Long Term Provisions & Others
564
TOTAL SOURCES OF FUNDS
391,321
APPLICATION OF FUNDS
Net Block
91,473
CWIP
19,610
LT Loans and Advances
25,193
Total Non-current Assets
136,304
Inventories
11,982
Debtors
3,995
Other Current Assets
9,136
Cash & Equivalents
255,350
Total Current Assets
280,463
Creditors
5,103
Other Current Liabilities & Provns
20,343
Total Current Liabilities
25,446
Net Current Assets
255,017
TOTAL APPLICATION OF FUNDS
391,321
FY15
FY16E
FY17E
FY18E
8,451
425,081
433,531
25,186
1,321
460,038
8,451
368,930
377,380
25,186
119,968
522,534
8,451
427,120
435,571
25,186
1,321
462,078
8,451
489,403
497,854
25,186
1,321
524,361
94,462
23,340
40,080
157,882
12,117
6,588
5,482
307,852
332,039
6,308
23,574
29,882
302,157
460,038
107,528
18,340
47,469
173,337
12,734
6,367
5,482
352,964
377,547
4,775
23,574
28,350
349,197
522,534
129,469
6,340
48,407
184,217
13,158
6,579
5,482
281,042
306,261
4,825
23,574
28,399
277,862
462,078
130,511
6,340
49,411
186,262
13,748
7,332
5,482
340,153
366,715
5,041
23,574
28,615
338,100
524,361
Page | 11
Cash Flow
FY14
Reported PBT
79,697
Non-operating & EO items
(19,611)
Interest expenses
449
Depreciation
7,846
Working Capital Change
1,331
Tax paid
(16,401)
OPERATING CASH FLOW ( a )
53,312
Capex
(18,498)
Free cash flow (FCF)
34,815
Investments
(1)
Non-operating Income
18,994
INVESTING CASH FLOW ( b )
495
Debt Issuance/(Repaid)
(4)
Interest expenses
(449)
FCFE
948
Share Capital Issuance
0
Dividend
(15,325)
FINANCING CASH FLOW ( c ) (15,778)
NET CASH FLOW (a+b+c)
38,029
EO Items/Others
Closing Cash & Equivalents
252,822
Key Ratios
FY15
95,701
(28,239)
235
6,442
(2,535)
(19,846)
51,758
(13,395)
38,364
28
28,211
14,844
0
(235)
15,079
0
(18,469)
(18,704)
47,898
303,248
FY16E
FY17E
92,366
93,786
(28,330) (22,576)
235
235
6,934
8,059
(1,929)
(587)
(18,473) (18,757)
50,803
60,160
(15,000) (18,000)
35,803
42,160
0
0
28,330
22,576
13,330
4,576
0
0
(235)
(235)
13,565
4,811
0
0
(18,786) (136,423)
(19,021) (136,658)
45,112 (71,922)
352,964 281,042
FY18E
100,382
(27,305)
235
8,959
(1,127)
(20,076)
61,067
(10,000)
51,067
0
27,305
17,305
0
(235)
17,540
0
(19,026)
(19,261)
59,111
340,153
FY14
PROFITABILITY (%)
EBITDA Margin
51.9
APAT Margin
51.5
RoE
19.8
Core RoCE
64.5
RoCE
20.1
EFFICIENCY
Tax Rate (%)
13.4
Asset Turnover (x)
0.9
Inventory (days)
32
Debtors (days)
11
Payables (days)
14
Cash Conversion Cycle (days)
29
Debt/EBITDA (x)
N/M
Net D/E
N/M
Interest Coverage
N/M
PER SHARE DATA
EPS (Rs/sh)
16.3
CEPS (Rs/sh)
18.2
DPS (Rs/sh)
3.5
BV (Rs/sh)
88.6
VALUATION
P/E
10.7
P/BV
2.0
EV/EBITDA
7.2
OCF/EV (%)
7.1%
FCF/EV (%)
4.6%
FCFE/Market Cap (%)
4.8%
Dividend Yield (%)
2.0
FY15
FY16E
FY17E
FY18E
51.1
56.4
20.2
69.0
20.3
50.1
57.2
20.0
110.3
20.1
50.7
48.5
18.7
86.2
18.7
50.2
49.6
17.4
52.6
17.5
14.5
0.9
30
16
16
31
N/M
N/M
N/M
12.0
0.8
32
16
12
36
N/M
N/M
N/M
19.0
0.8
30
15
11
34
N/M
N/M
N/M
19.0
0.8
30
16
11
35
N/M
N/M
N/M
19.4
20.9
4.4
102.6
19.2
20.9
27.8
89.3
18.0
19.9
3.6
103.1
19.2
21.4
3.8
117.8
9.0
1.7
6.3
6.9%
5.1%
7.2%
2.5
9.1
2.0
5.9
6.7%
4.7%
6.6%
15.9
9.7
1.7
6.2
7.9%
5.6%
6.3%
2.1
9.1
1.5
5.3
8.1%
6.7%
9.2%
2.2
Page | 12
RECOMMENDATION HISTORY
Hindustan Zinc
200
Date
31-Mar-16
TP
CMP
175
Reco
BUY
Target
195
180
160
140
120
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
100
Rating Definitions
BUY
: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period
Page | 13
Disclosure:
We, Ankur Kulshrestha, PGDBM & Anuj Shah, MSc authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our
views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in
this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its
Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No
Disclaimer:
This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or
arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of
warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for
information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be
construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments.
This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any
locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HDFC
Securities Ltd or its affiliates to any registration or licensing requirement within such jurisdiction.
If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender. This document may
not be reproduced, distributed or published for any purposes without prior written approval of HDFC Securities Ltd .
Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived
from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk.
It should not be considered to be taken as an offer to sell or a solicitation to buy any security. HDFC Securities Ltd may from time to time solicit from, or perform broking, or other services
for, any company mentioned in this mail and/or its attachments.
HDFC Securities and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies)
mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and
other related information and opinions.
HDFC Securities Ltd, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any
action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the
dividend or income, etc.
HDFC Securities Ltd and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report,
or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report.
HDFC Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any
other assignment in the past twelve months.
HDFC Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report
for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or
specific transaction in the normal course of business.
HDFC Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research
report. Accordingly, neither HDFC Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is
not based on any specific merchant banking, investment banking or brokerage service transactions. HDFC Securities may have issued other reports that are inconsistent with and reach
different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served
as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research
Report. HDFC Securities Ltd. is a SEBI Registered Research Analyst having registration no. INH000002475
HDFC securities
Institutional Equities
Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park,
Senapati Bapat Marg, Lower Parel, Mumbai - 400 013
Board : +91-22-6171 7330 www.hdfcsec.com
Page | 14

Report

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Report

Transféré par

Droits d'auteur :

Formats disponibles

INITIATING COVERAGE

KEY STOCK DATA

No. of Shares (mn)

MCap (Rsbn) / ($ mn)

6m avg traded value (Rsmn)

STOCK PERFORMANCE (%)

SHAREHOLDING PATTERN (%)

Public & Others

Silver to offset flat-lining Zn

Zinc (Zn) is headed into a structural deficit mainly

because of the recent/upcoming mine closures

Long-term support for industry fundamentals may

come from the fact that at current prices, new

HZL, the worlds fourth-largest Zn producer and

second-largest miner, operates some of the lowest

Due to higher silver content in the ore at SK mine

(182 g/t in P+P reserves vs. ~50 at RA), HZL is

and view: On flattish EBITDA

Source: Company, HDFC sec Inst Research

HINDUSTAN ZINC : INITIATING COVERAGE

Zn: Headed into structural deficit

Led by mine closures and

Chinese Zn demand is expected

Metal production (CAGR CY10-15: 1.7%) has

World Refined Zinc Supply And Usage 2010-2015

CY11 CY12 CY13 CY14

Near-term forecasts predict market deficit, as

In the near term, Zn mine production is forecast

to increase ~1.8% (ILZSG forecast for CY16),

Significant Zn operations reached the end of

their mine life recently (Century in Aug-15,

Horsehead Holding Corp, a large US Zn

Source: ILZSG, HDFC sec Inst Research

ILZSG expects Zn industry to

Urbanisation in China to drive demand

Forecast Large Drops In Zn Supply

While global steel demand is likely to stagnate

(worldsteel expects 0.7% growth in CY16 after a

This is on account of lower proportion of

galvanised steel output in China (~5% of crude

China will continue to remain the dominant

driving force as galvanised sheet usage in cars,

Source: Company, ILZSG, HDFC sec Inst Research

Global production of refined zinc metal in 2015 is

forecast to rise by 1.6% to 14.2 mT. An

ILZSG forecasts demand to rise by 3.3% to 14.4

mT in 2016, driven by a 4.9% increase in China,

HINDUSTAN ZINC : INITIATING COVERAGE

The Zn industry is expected to move from a

Current Zn prices are not

Production cuts announced by Glencore (500 kT),

Per Metal Bulletin (via Bloomberg), recent

Chinese smelter (500kT) and Nyrstar (mine

negotiations for Zn treatment charges between

LME and SHFE stocks fell by 106 kT (14%) during

Teck and Korea Zinc signed an agreement for zinc

2015 and this

Unremunerative prices to disrupt future supply

concentrates supply in 2016, with the TC set at

Nyrstar, the worlds largest refined zinc

producer, estimates that the current price levels

It estimates Zn price of US$ 2,500/t (real terms:

~US$ 2,200) required to incentivise new mine