Hindustan Zinc share price plunged 6 per cent to Rs 321.85 on the NSE in Monday’s intra-day trade, after the company reported an 18 per cent on-year rise in consolidated net profit to Rs 2,928 crore for the quarter ended March 2022. The Vedanta group company’s EBITDA margin expanded 100 basis points (bps) to 55.5 per cent from 53.5 per cent in Q4FY21. Brokerages remained bullish on the stock despite the steep correction intraday. “We remain positive on Hindustan Zinc given its presence in the lower end of the global cost curve facilitated by high grade captive mines sufficient to meet requirements for decades, 100% captive power plants, sizeable scale, diversified revenue stream with increasing contribution from silver sales and strong balance sheet/high dividend pay-out,” said JM Financial Services in its report.

Should you buy, hold or sell Hindustan Zinc shares?

JM Financial Services: Buy
Target price: Rs 355

Hindustan Zinc is ranked in top 100 global companies by Global Sustainability Magazine and has received board approval to undertake a long-term captive renewable power development plan up to a capacity of 200 MW. Analysts at JM Financial Services remain positive on the company given its presence in the lower end of the global cost curve. “We revise FY23/24 earnings / fair value upwards as we factor in higher LME assumption,” they said. The brokerage maintains a ‘buy’ rating on the stock with a target price of Rs 355 per share.

Edelweiss Securities: Hold
Target price: Rs 352

Hindustan Zinc’s Q4FY22 EBITDA of Rs 5,007 crore (up 29% on-year) was in line with Street’s estimates. Despite a good scope of cash accretion and sustainable dividend yield of 5-6%, analysts at Edelweiss Securities find the risk-reward balanced at the current market price. “Going ahead, we see sustained cash accretion owing to high LME prices, though operating guidance remained soft. We await the commissioning of the fumer, which is critical for HZL meeting its silver volume. At CMP, we find risk-reward balanced,” it said in its report. The brokerage maintains ‘HOLD’ rating on the stock with an unchanged target price of Rs 352 (10x EPS) as they roll over to Q2FY24E EPS.

Motilal Oswal Financial Services: Neutral
Target price: Rs 370

Hindustan Zinc’s Q4 profit was marginally below Motilal Oswal Financial Services’ estimates due to lower than estimated other income and higher taxes, which includes taxes for the prior period. Other income was lower as benefit of falling interest rates in the previous quarters is behind them. The brokerage firm believes that the 2.35x price rise of thermal coal in a year will push up the cost of production ahead. “The stock is trading at 6.5xour FY23 EV/EBITDA estimates. The probability of zinc prices correcting from current levels is higher than an up move as the energy and inventory situation normalizes globally. Despite a 37% rise in zinc prices and raising our TP to Rs 370 per share (from Rs 325 earlier), we maintain our Neutral rating, an upside of 8% from current levels,” it said.

IIFL Securities: Reduce
Target price: Rs 346

With LME Zinc at multi-year highs amid European smelter closures due to high energy prices, Hindustan Zinc’s FY23 earnings/cash flows will see a boost, said analysts at IIFL Securities. However, they expect LME Zn to moderate as mine supplies ramp up, which is already visible through rising treatment charges for smelters. “HZL, meanwhile, is focussing on stabilising mined metal production and completing necessary balancing/testing of smelter, which would keep volume growth muted in FY23 after a strong 4Q. We raise EBIDTA by 4% for FY23/24, but downgrade the rating to Reduce amid rich valuation at 7.4x FY24 EV/EBIDTA,” the brokerage said.

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