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Informist, Monday, Jan. 27, 2025

By Aman Aryan

MUMBAI – High base metal prices and better volumes are expected to drive Hindustan Zinc Ltd.'s revenue for the December quarter.  The net profit is expected to track the operating profit growth for the third consecutive quarter. If the earnings are in line with estimates, this will be the third consecutive quarter when the company's net profit rises on year after falling for six quarters in a row.

The Vedanta group firm is expected to post a net profit of INR 24.83 billion, up 22% on year, according to the average of the estimates of five brokerage firms. Estimates for the zinc producer's net profit range from INR 23.07 billion by Motilal Oswal Financial Services Ltd. to INR 25.70 billion by Systematix Shares and Stocks (India) Ltd. 

The company's revenue is seen up 16% on year at INR 84.74 billion, according to the average of five estimates. Brokerage Motilal Oswal gave the lowest estimate for the company's revenue at INR 82.05 billion, while Kotak Institutional Equities gave the highest estimate of INR 87.43 billion. Sequentially, the company's net profit and revenue are seen up 8% and 3%, respectively.

While analysts expect Hindustan Zinc to post higher volumes for the December quarter, the company's overall production fell during the quarter. In an update earlier this month, the company said mined metal production volume in the December quarter fell 2% on year to 265,000 tonnes. However, the company's mined metal production rose 3% sequentially due to higher mined metal grades and increased production at the Agucha and Zawar mines in Rajasthan. 

Production of saleable metal, which includes refined zinc and lead, was flat at 259,000 tonnes. The company produced 204,000 tonnes of refined zinc and 55,000 tonnes of refined lead during the quarter. Refined metal production was down 1% sequentially due to a planned maintenance shutdown in the December quarter.

The production of silver declined to 160 tonnes during the December quarter, down 18% over the same period a year ago, the company had earlier said. Sequentially, the company's output of silver fell 13%. 

While Kotak Institutional Equities and Nuvama expect actual sales by Hindustan Zinc to be close to the production figures, Motilal Oswal expects the company's zinc and silver sales volumes to be lower by 5,000 tonnes and 5 tonnes from their respective production figures. However, lead sales volume is expected to exceed the production figure by 10,000 tonnes, according to estimates from Motilal Oswal.   

The average price of zinc in the December quarter was up 22% on year and nearly 10% on quarter. This would support the company's revenue growth for the quarter, when production was nearly flat on year. The average price of silver in the December quarter rose 35% on year and was up 7% on quarter. This would also support the company's revenue growth by a good measure. However, average lead prices were down nearly 4% on year and 2% on quarter.

The operating profit or earnings before interest, tax, depreciation, and amortisation is seen down 22% on year at INR 43.41 billion, according to the average of the estimates of five brokerage firms. Estimates for the company's EBITDA range from INR 40.52 billion to INR 44.60 billion. Price-driven revenue growth is expected to drive growth in the company's EBITDA for the December quarter.

Hindustan Zinc's cost of production ex-royalty for zinc is expected to be flat sequentially, Nuvama said. The company's cost of production for zinc without royalty for the September quarter was $1,071 per tonne, down 6% on year, owing to higher volume, better linkage coal availability, softened coal and input commodity prices, and operational efficiencies on year. 

The company will detail its earnings on Tuesday. After the results, investors and analysts will track the company's guidance on volumes, realisations, cost of production, and future dividend payout, according to Motilal Oswal. "We await further insights on any other update related to the change in the corporate structure, if any," the brokerage said. 

At 1223 IST, shares of Hindustan Zinc were at INR 454.45 on the National Stock Exchange, down 2.6%. The stock is down 10% from the closing price on Oct. 18, when it released its earnings for the September quarter. Of the two brokerage reports on the company available with Informist, one has a 'neutral' rating on the stock, while the other has a 'reduce' rating. 

Following are the Oct-Dec earnings estimates for Hindustan Zinc based on reports compiled by Informist from five brokerages in descending order by the estimate of net profit: 

End

US$1 = INR 86.41

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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