Hindustan Zinc Ltd Research ReportQ3FY21

FY21 silver volume is likely to exceed the guidance… Hindustan Zinc (HZL) reported steady set of performance for Q3FY21, wherein topline and EBITDA came in marginally higher than our estimate, while PAT came broadly in line with our estimates. For the quarter, zinc sales volumes came in at ~182000 tonnes (up 6% YoY, 1% QoQ, marginally higher than our estimate: 180048 tonnes), lead sales volume came in at ~53000 tonnes (up 26% YoY, however down by 7% QoQ, in line with our estimate: 53188 tonnes) while silver sales volume came in at ~183000 kg (up 19% YoY, however down 10% QoQ, higher than our estimate: 175000 kg). EBITDA came in at | 3269 crore (up 43% YoY, 11% QoQ), marginally higher than our estimate of | 3128 crore. EBITDA margin came in at 54.2%, broadly in line with our estimate of 54.0% (EBITDA margin of 52.2% in Q2FY21 and 49.0% in Q3FY20). HZL’s Zinc cost of production (CoP) before royalty during quarter stood at US $946/tonne per tonne, lower by 12%YoY & higher by 3%QoQ. The ensuing PAT for Q3FY21 stood at | 2200 crore (up 36% QoQ but down 13% YoY), in line with our estimate of | 2173 crore. Healthy reserve base provide earnings visibility over long term HZL has a huge reserve base, which provides strong earnings visibility. During the year, total ore reserves increased from 92.6 million tonnes (MT) at the end of FY19 to 114.7 MT at the end of FY20, while mineral resources totalled 288.3 MT.