HZL guided for mined metal production of 9.1-9.2 lakh tonne in FY15 and 1 million tonne in FY16. Accordingly, we lower FY15 mined metal volume assumption by 7% to 9.1 lakh tonne from 9.75 lakh tonne, and FY16 volume assumption by 1.5% to 9.6 lakh tonne from 9.75 lakh tonne. This leads us to cut FY15 and FY16 Ebitda estimates by 5% and 1%, respectively. The companys mine development expense is expected to double in FY15, but our estimates already factor in higher costs.
We remain positive due to volume growth (albeit back-ended) and firm zinc-lead prices despite the marginal decline in estimates.
HZL Q4FY14 Ebitda at R1,760 crore (down 17% y-o-y, 4% q-o-q) missed our R1,840-crore estimate due to higher-than-expected mine development expense, freight, repair and provisions. This was partly negated by higher revenue (surpassed our expectation by 5%), led by higher lead and silver volumes and better zinc spreads over LME.
The companys PAT at R1,880 crore beat our R1,800-crore estimate due to higher other income and lower tax rate. Other income at R590 crore was significantly higher than our estimated R500 crore, as it included mark-to-market gain of R80-90 crore. Tax rate was also favourable at 11.2% (estimated 15.1%). Cash balance at end of FY14 at R25,500 crore was higher than our estimate of R24,500 crore.