Hindustan Zinc gains after decent Q2 result

Hindustan Zinc's net profit rose 14.66% to Rs 2081 crore in Q2 September 2019 over Q2 September 2018.

Revenue from operations fell 5.23% to Rs 4,461 crore in Q2 September 2019 over Q2 September 2018. The company announced its Q2 earnings during market hours today.

Shares of Hindustan Zinc closed 1.64% higher at Rs 220.55.

Mined metal production rose 3% on QoQ basis to 219,000 MT on account of higher ore production but dropped 6% on YoY basis on account of transient lower grades at Sindesar Khurd mine.

The Zinc manufacturer's revenue from operations dropped 5.23% to Rs 4461 crore on YoY basis. The company clarified that the fall in revenue was primarily due to a fall in LME (London Metal Exchange) prices and lower volumes in lead & silver.

The company's EBITDA fell 8% to Rs 2120 crore in Q2 September 2019 as against Rs 2315 crore in Q2 September 2018. The company further clarified that in accordance with IND AS 106, Exploration for and Evaluation of Mineral Resources, it has capitalized exploration expenses of Rs 51 crore based on commercial viability.

The production in first six month was affected by geo-technical issues in Sindesar Khurd mine. Mined metal and refined metal production in H2 FY2020 is expected to be higher than in H1 on account of continued ramp-up of underground mines. The production at SK mine is expected to ramp up in H2 on account of opening of new blocks, faster development and higher back filling post commissioning of second paste fill plant.

The revised guidance for both mined and refined metal production in FY2020 is c.950kt while silver production is expected to be c.650 MT. The COP before royalty is projected to be c.$1030 per MT in H2 FY2020 including the impact of higher electricity duty. The project capex for the year will be c.$300 million.

Hindustan Zinc is one of the largest integrated producers of zinc-lead products. Mining company, Vedanta has a 64.92% share in Hindustan Zinc. The company headquartered in Udaipur, Rajasthan has zinc-lead mines across the country.

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