Hindustan Zinc Limited (HZL) - the key player in the domestic zinc industry and one of the few profitable company in the public sector has been consistently doing well. The firm zinc prices in the domestic market have been the motivating factor for the company. Other factors like focus on reduction in cost have also played a major role.The results for the first quarter confirm this trend. For the first quarter ended June 2000, gross sales stood at Rs 401.53 crore - a growth of 5.5 per cent over corresponding period's figure of Rs 380.57 crore. Even if one were to compare this with the immediate quarter (Jan - March 2000), the growth in sales was 2 per cent.
However, what was impressive was the fact that the company has managed to show a smart improvement in profit margins. OPM improved from 13.09 per cent to 14 per cent. This improvement was mainly on account of the company's ability to maintain its cost at lower levels.For instance, the employee cost has shown declined from Rs 68.99 crore to Rs 63.73 crore in the first quarter. The implementation of VRS scheme last year was prime factor for this decline, and will continue to have a positive impact on its profit margins.
Another factor which affected bottomline was a sharp drop interest burden which fallen from Rs 3.14 crore to Rs 66 lakh. Last year, the company had become a zero debt company, and will continue to play its role on profit margins at the net level.Net profit was up 36 per cent to Rs 38.58 crore. For the future, with prospects for the zinc prices remaining positive, the company will not find it difficult to maintain the profit margins. As for demand for zinc is concerned, the growth is likely to be at the rate of around 5-7 per cent, feel industry experts.
The international zinc prices have shown a firm trend in the recent past, and the trend is likely to continue.With reduction in cost, and low interest burden, the profitability growth is likely to be repeated in the coming quarter.
As far as the stock market is concerned, the performance has not been very impressive. A huge equity capital of Rs 422.53 crore has been the main culprit for poor market fancy. The PSU tag has also played its role.The trading volume on this counter has been average of around 40,000 shares in the last couple of months. The stock has remained under pressure since September last year. The technical position of the stock is far from impressive.
The stock had made a bottom of Rs 6 recently which should be considered as a stop loss point. On the upper side, the stock has a strong resistance at Rs 30, and is likely to face strong selling pressure wherever it makes an attempt to touch that level.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.