Hindustan Zinc

Hindustan Zinc Logo

Hindustan Zinc was a public sector undertaking. Later on the company was sold to Vedanta Ltd., in 2003 as part of the privatisation plan of the NDA Government. Vedanta holds 64.92% shares while the Government of India holds 29.58%. Only 5.5% are held by DIIs, FIIs and the public.

Hindustan Zinc is a dominant player in Zinc, Lead and Silver. It has a dominant market share of 77%.

For the past two years the Zinc, Lead industry has been reeling under demand constraints. This, in turn, took pressure on the rates of Zinc and Lead. This was reflecting the stock market also. Barring the downturn due to COVID 19, the stock has seen moving in the narrow band between 220 and 300 for the past five years.

Photo Courtesy: Company Website

Now the fortune for these metals seems to have changed. There was a good demand and the company posted impeccable results for the quarter ending 31st December 2021. Sales were off by over 42%. The prices have also seemed to have firmed up. The operating profit margin was around 55% and the net profit before taxes grew by about 36% compared to the previous quarter. Generally, demand problems of Zinc, Lead and Silver are also coming down. The buzz of the future, EV, will also help in the growth of the company. The company plans to invest Rs.14,000 crores over the next five years for capacity expansion. This should owe no problem for the company. It boasts a Balance Sheet cash of over Rs.7,000 crores and it has a AAA rating with minimal loans in the books. The company should have no problem in implementing the projects.

What’s more? Like most of the government companies, this has an impeccable dividend track record with a dividend of Rs.37.8 per share in the calendar year 2000, Rs.18% per share in the calendar year 2021. Over a period of time this has returned a minimum of 7% of the market value of the share as a dividend. It looks like good days for Hindustan Zinc have at last arrived.

Let us look at the enterprise valuation and shareholders value of Hindustan Zinc. Before valuation, a quick look at the past financials.

Courtesy Money Control: Muted demand due to covid is firmly going away. Likely Revenue for FY2022 will be over Rs.27000+ Cr. A YoY growth of over 25%
Courtesy Money Control: 25% revenue growth would imply a profit Rs.10000 Cr. However profit growth is likely to remain muted. We expect the company to end with a net profit of Rs. 8500 Cr. as against Rs.7980 Cr. in FY21.
Courtesy: Money Control: Company’s Return on Equity will continue to be at a healthy rate of 25% for the finance year 2022. We believe it will improve further in the coming years. Translated, Hindustan Zinc is likely to end FY2022 at an earnings per share of Rs. 18.89 in FY2021

A few basic details and quality parameters about the company

Ratios are based on FY2021 and before

These are based on financials of the company based on the year ended FY2021. These generally indicate long term prospects of the company. Most of the ratios are self explanatory. A few require explanation, though. Piotroski F score is a number from 0 to 9 that signifies financial health. Higher the number better it is. G Factor or Growth Factor is a number between 0 and 9 that signifies the potential to grow faster. Higher combination Piotroski score and G Factor are quite rare. We arrive at a graded score based on about 20 such parameters. Our score for Hindustan Zink is 63. which is very good.

Estimates based on past. Future outlook also determines the eventual number
Discounted Cashflow valuation table, in case you are interested.
Valuation based on these calculations. We will be revisiting it as soon as new financials are available in May’2022.

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DISCLAIMER This Blog, its owner  & contributors are neither a Research Analyst nor an Investment Advisor and expressing the views only as a valuation enthusiast and an Investor in Indian equities. He/She is not responsible for any loss arising out of any information, post or opinion appearing on this blog. Investors are expressly advised to treat the blog entries as one more opinion on the subject company and are expressly advised to do own due diligence and/or consult financial consultant before any investment decision. Author of this blog not providing any paid service and not sending bulk mails/SMS to anyone or asking for email ids or contact details. These are just ballpark enterprise valuations. We do not claim the value provided by us to be correct. These are based on the past ten years financials which has no relevance to the future whatsoever. We are not providing any recommendation on the stocks concerned. In fact, the market price is of no relevance to us and we just provide the enterprise value debt component and shareholders value. And its future business prospects. Additional Disclaimer: We don’t hold shares in Hindustan Zinc, but we hold shares in its holding company Vedanta Limited and hence our views may be biased. Reader is advised to do his own due diligence.

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