Incorporated in 1966, Hindustan Zinc, a Vedanta Group company in the Zinc-Lead and Silver business is the world’s 2nd largest integrated Zinc producer and now the 3rd largest Silver producer. The company has a market share of 75 percent of the growing Zinc market in India.
With a market capitalization of Rs.2,52,124 crores, the shares of Hindustan Zinc started Friday’s trading session on a higher note at Rs. 584.75 compared to its previous close of Rs. 583.30. During the trading session, the shares hit a high of Rs. 619.10, gaining around 4 percent, also recorded as the company’s fresh- 52 week high and closed the day at Rs. 588 apiece.
Reflecting on results and other factors, the stock has delivered a multibagger return of 101 percent in 50 days. Here are the reasons:
One significant reason for the increase in the share price is the company’s strong financial performance and record production figures.
Looking at the company’s financial statements, the revenue increased by 3 percent from Rs. 7,067 crores during the December quarter to Rs. 7,285 crores in the March quarter. On the other hand, the net profits increased by around 1 percent from Rs. 2,028 crores to Rs. 2,038 crores during the same timeframe.
The company generated a cash flow of Rs. 2,099 crores during the quarter. As of March 31, 2024, the company’s gross investments and cash and cash equivalents were Rs. 10,186 crores as compared to Rs. 9,743 crores at the end of December 23 which was invested in high-quality debt instruments.
Hindustan Zinc recorded the highest-ever quarterly refined metal production at 273 kt, up 6 percent sequentially on account of better plant availability and up 1 percent YoY. Silver recorded the highest volume in FY24 in line with management’s operational and financial strategy, at 24.0 moz up 5 percent YoY.
For FY24, the company achieved its best-ever mined metal production at 1,079 kt, a 2 percent increase from the previous year, driven by improved mined metal grades. Refined metal production also reached its highest annual level.
Additionally, the rally in the share was also supported by the global upturn in the commodities cycle. In FY24, silver prices showed signs of recovery from recent lows which was influenced by a complex interplay of factors spanning economic data points, geopolitical tensions, and market-specific dynamics.
Regarding the zinc outlook, usage is anticipated to rise in India, Mexico, China and Vietnam on the back of increased focus on infrastructure, while the demand in Europe and the US is likely to remain flat.
Future demand for lead is expected to surge due to escalating urbanization, industrialization, and automotive consumption, especially in developing nations. Hindustan Zinc is witnessing robust lead demand propelled by vigorous automotive sales, reflected in the growing numbers of passenger vehicles and two-wheelers.
On Mach 28 2024, the stock price was trading at Rs. 292.30 exhibiting a gain of around 101 percent compared to the current price. For example, if someone had invested Rs. 1 lakh into the company’s stock just 50 days ago, it would have converted to approximately Rs. 2.01 lakhs now.
Moreover, Hindustan Zinc has reached out to the government with a revised demerger plan. The company is seeking approval for its proposal to split off certain assets and operations into a separate entity.
The demergers involve separating a company’s business into two or more entities, allowing each to focus on its core competencies. In Hindustan Zinc’s case, the demerger aims to create a more streamlined and efficient structure for the company’s operations.
The government’s approval is crucial for Hindustan Zinc to proceed with its revised demerger plan. The company is likely working closely with the relevant authorities to address any concerns and obtain the necessary approvals to implement the demerger successfully.
In FY25, the company anticipates both mined metal and refined metal production to surpass the previous year’s figures due to the full implementation of major projects launched last year and enhanced capacity utilization.
Mined metal output is forecasted to range between 1,100-1,125 kt, while refined metal production is estimated to fall within 1,075-1,100 kt. Saleable silver production for FY25 is projected to range between 750-775 MT.
The zinc cost of production in FY25 is expected to range from USD 1,050-1,100 per MT. Additionally, the company’s projected project capital expenditure for the year is expected to be in the range of USD 270 to 325 million.
Written By Vaibhav Patil
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