Hindustan Zinc reported strong financial results for the fourth quarter of fiscal year 2010. Net revenues were ahead of estimates due to higher sales of silver and zinc/lead concentrates. Net profit grew 124.7% year-over-year to Rs1,239cr, in line with estimates, driven by rising metal prices and increased production volumes. The analyst maintains an "Accumulate" rating and target price of Rs1,399, believing the company is well-positioned to benefit from expanding capacity and higher silver output.

1. 4QFY2010 Result Update I Base Metals
April 21, 2010
Hindustan Zinc ACCUMULATE
CMP Rs1,232
Performance Highlights Target Price Rs1,399
Hindustan Zinc (HZL) continues to register strong operational performance in Investment Period 12 Months
4QFY2010 and reported net revenues of Rs2,545cr, which was ahead of our
estimate of Rs2,334cr. However, net profit at Rs1,239cr, registering a growth Stock Info
of 124.7% yoy, was in line with our estimate of Rs1,235cr. We believe that Sector Base Metals
HZL is well poised to benefit from:1) the scale-up of zinc-lead smelting
capacity to 1.1mn tonnes, and 2) a significant increase in silver production Market Cap (Rs cr) 52,049
along with 100% backward linkages. We maintain an Accumulate on the Beta 1.0
stock, with a Target Price of Rs1,399.
52 WK High / Low 1,325/458
Strong performance continues: HZL’s net revenue was ahead of our estimate
Avg. Daily Volume 60928
primarily due to the higher concentrate and by-product sale of silver metal.
Silver sales volume increased by 26.6% yoy to 42,399kg, while zinc and lead Face Value (Rs) 10
concentrate sales during the quarter stood at 49,073 tonnes. Although zinc
BSE Sensex 17,473
volumes fell marginally by 1.0% yoy to 151,294 tonnes, lead volumes
increased 17.9% yoy to 18,450 tonnes. Zinc and lead realisations increased Nifty 5,245
by 105.9% yoy and 85.3% yoy to US $2,462/tonne and US $2,473/tonne,
respectively. Consequently, operating margins increased by 1,574bp to Reuters Code HZNC.BO
60.8%. Although interest expenses increased by 470% yoy to Rs28cr and Bloomberg Code HZ @IN
other income fell by 30.8% yoy to Rs134cr, net profit spiked 124.7% yoy to
Rs1,239cr, in line with our estimate of Rs1,235cr. Shareholding Pattern (%)
Promoters 64.9
Outlook and Valuation: At the CMP of Rs1,232, the stock is trading at 6.1x
FY2011E and 3.7x FY2012E EV/EBITDA. We believe that HZL is well poised to MF/Banks/Indian FIs 31.7
benefit from: 1) the scale-up of zinc-lead smelting capacity to 1.1mn tonnes,
FII/NRIs/OCBs 2.3
and 2) a significant increase in silver production along with 100% backward
linkages. Plans of the Sterlite group to buy out the remainder of the Indian Public 1.1
government’s holding could provide further upside. In addition, with HZL
Abs. (%) 3m 1yr 3yr
being one of the lowest cost producers in the world and having a huge cash
balance of Rs11,900cr at the end of the quarter (Rs282 per share), we Sensex 2.5 60.3 25.7
maintain an Accumulate on the stock, with a Target Price of Rs1,399, valuing
the stock at 5.5x FY2012E EV/EBITDA. HZL 4.1 152.3 86.6
Key risks to our call: 1) Weaker zinc and lead prices, and 2) Adverse
exchange rate movements.
Key Financials
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 5,680 8,139 9,764 12,884
% chg (27.9) 43.3 20.0 31.9
Net Profit 2,728 4,041 5,063 6,864
% chg (38.0) 48.2 25.3 35.6
OPM (%) 48.1 58.9 60.0 60.2
EPS (Rs) 64.6 95.6 119.8 162.4
P/E (x) 19.1 12.9 10.3 7.6 Paresh Jain
P/BV (x) 3.6 2.9 2.3 1.8 Tel: 022 – 4040 3800 Ext: 348
RoE (%) 20.8 24.9 24.7 26.1 E-mail: pareshn.jain@angeltrade.com
RoCE (%) 18.0 26.5 25.9 27.3
Pooja Jain
EV/Sales (x) 7.5 4.9 3.6 2.2
Tel: 022 – 4040 3800 Ext: 311
EV/EBITDA (x) 15.5 8.3 6.1 3.7 E-mail: pooja.j@angeltrade.com
Source: Company, Angel Research
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Hindustan Zinc I 4QFY2010 Result Update
Exhibit 1: 4QFY2010 Performance
Y/E March (Rs cr) 4QFY10 4QFY09 yoy (%) FY10 FY09 yoy (%)
Net Sales 2,545 1,289 97.4 8,139 5,680 43.3
Mining and
Manufacturing 566 466 21.4 1,961 1,906 2.9
expenses
% of Net sales 22.3 36.2 24.1 33.5
Mining Royalty 191 84 128.0 613 364 68.2
% of Net sales 7.5 6.5 7.5 6.4
Staff Cost 135 87 55.1 457 365 25.3
% of Net sales 5.3 6.8 5.6 6.4
Admin and selling 105 71 48.3 316 311 1.4
% of Net sales 4.1 5.5 3.9 5.5
Total Expenditure 997 708 40.9 3,347 2,946 13.6
% of Net sales 39.2 54.9 41.1 51.9
EBIDTA 1,548 581 166.3 4,792 2,734 75.3
% of Net sales 60.8 45.1 58.9 48.1
Interest 28 5 469.5 44 22 100.7
Depreciation 101 75 34.1 334 285 17.2
Other Income 134 194 (30.8) 600 931 (35.5)
Exceptional Items - - - -
Profit before Tax 1,554 696 123.4 5,014 3,358 49.3
% of Net sales 61.1 54.0 61.6 59.1
Provision for tax 315 144 118.7 973 631 54.2
% of PBT 20.3 20.7 19.4 18.8
Profit After tax 1,239 551 124.7 4,041 2,728 48.2
% of Net sales 48.7 42.8 49.7 48.0
EPS (Rs) 29.3 13.1 124.8 95.6 64.6 48.2
Source: Company, Angel Research
Higher by-product sales led to strong top-line performance
HZL’s saleable zinc production was flat at 150,309 tonnes (150,544 tonnes), while
saleable lead production increased by 16.9% yoy to 18,345 tonnes (15,691 tonnes).
Consequently, zinc volumes declined by 1.0% yoy to 151,294 tonnes (152,796
tonnes), while lead volumes increased by 17.9% yoy to 18,450 tonnes (15,651
tonnes). However, zinc and lead realisations increased by 105.9% yoy to US
$2,462/tonne and 85.3% yoy to US $2,473/tonne, respectively.
Sales were also supported by higher zinc and lead concentrate sales during the
quarter at 49,073 tonnes. Silver production increased by 22.4% yoy to 43,066
tonnes (35,176 tonnes), while sales grew 26.6% yoy to 42,399kg (33,496kg).
Average silver realisation surged 41.0% yoy to Rs25,970/kg (Rs 19,978/kg). Thus,
net revenues increased by 97.4% to Rs2,545cr, ahead of our estimate of Rs2,334cr.
April 21, 2010 2

3. Hindustan Zinc I 4QFY2010 Result Update
Exhibit 2: Zinc Metal Volumes down 1.0%; Realisations up 105.9%
180,000 4,000
160,000 3,500
140,000 3,000
120,000
2,500
(US $/tonne)
(tonnes)
100,000
2,000
80,000
1,500
60,000
40,000 1,000
20,000 500
0 0
Q2 2008 Q4 2008 2QFY09 4QFY09 2QFY10 4QFY10
Volume (LHS) Realisation (RHS)
Source: Company, Angel Research
Exhibit 3: Lead Metal Volumes up 17.9%; Realisation up 85.3%
25,000 4,000
3,500
20,000
3,000
(US $/tonne)
15,000 2,500
(tonnes)
2,000
10,000 1,500
1,000
5,000
500
0 0
Q2 2008 Q4 2008 2QFY09 4QFY09 2QFY10 4QFY10
Volume (LHS) Realisation (RHS)
Source: Company, Angel Research
EBITDA margins expand by 1,574bp to 60.8%
During the quarter, royalty costs increased by 128.0% yoy to Rs191cr and salary
costs were up by 55.1% yoy to Rs135cr. However, higher by-product sales resulted in
operating margins expanding by 1,574bp to 60.8%, marginally lower than our
estimate.
Net profit up 124.7% in line with our estimate
In 4QFY2010, though interest expenses increased by 470% yoy to Rs28cr and other
income fell by 30.8% yoy to Rs134cr, net profit moved up 124.7% yoy to Rs1,239cr
on the back of strong operating performance.
Status on Expansion projects
• At the end of the quarter, the 210,000 tonne zinc smelter at Dariba and 1mtpa
zinc concentrator at Rampura Agucha was successfully commissioned around
three months ahead of schedule.
• The 100,000 tonne lead smelter is expected to be commissioned in
2QFY2011E.
• Mining projects at Sindesar Khurd is also on schedule for commissioning by
1QFY2011E.
April 21, 2010 3

4. Hindustan Zinc I 4QFY2010 Result Update
Outlook
Zinc Metal surplus to decline by 40.3% in CY2010E
As per ILZSG, in CY2010E, global zinc usage is expected to grow by 11.9% to
12.04mn tones, whereas refined zinc production is expected to increase by 10.1% to
12.26mn tonnes. Hence, global zinc metal supply is likely to remain in surplus by
227,000 tonnes in CY2010E, a decline of 40.3% from a surplus of 380,000 tonnes
in CY2009E.
Lead Metal surplus to increase by 25% in CY2010E
As per ILZSG, lead metal is expected to remain in surplus by 100,000 tonnes
(80,000 tonnes) in CY2010E. Global lead usage is expected to grow by 7.5% yoy to
9.6mn tonnes. ILZSG expects demand to recover in Europe and US by 8.8% and
2.9% respectively, while China’s lead demand is expected to grow by 7.8% in
CY2010E. Lead metal production is likely to increase by 7.4% to 9.7mn tonnes,
primarily driven by the commissioning of new plants in Brazil and India.
Valuation
At the CMP of Rs1,232, the stock is trading at 6.1x FY2011E and 3.7x FY2012E
EV/EBITDA. We believe that HZL is well poised to benefit from: 1) the scale-up of
zinc-lead smelting capacity to 1.1mn tonnes, and 2) a significant increase in silver
production along with 100% backward linkages. Plans of the Sterlite group to buy
out the remainder of the government’s holding could provide further upside.
Moreover, with HZL being one of the lowest cost producers in the world and having
a substantial cash balance of Rs11,900cr at the end of the quarter (Rs282 per
share), we maintain an Accumulate on the stock, with a Target Price of Rs1,399,
valuing the stock at 5.5x FY2012E EV/EBITDA.
Key risks to our call: 1) Weaker zinc and lead prices, and 2) Adverse exchange rate
movements.
Exhibit 4: 1-year forward EV/EBITDA
(Rs mn)
700,000
600,000
9x
500,000
400,000 7x
300,000 5x
200,000 3x
100,000
1x
0
(100,000)
Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Source: Bloomberg, Angel Research
April 21, 2010 4

5. Hindustan Zinc I 4QFY2010 Result Update
Exhibit 5: 1-year forward P/E
(Rs)
1,800
14x
1,600
1,400
1,200 10x
1,000
800 6x
600
400
2x
200
0
Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Source: Bloomberg, Angel Research
Exhibit 6: 1-year forward P/BV
(Rs)
3,000
5x
2,500
2,000 3.5x
1,500
1,000 2x
500
0.5x
0
Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Source: Bloomberg, Angel Research
April 21, 2010 5

6. Hindustan Zinc I 4QFY2010 Result Update
Profit & Loss Statement Rs crore
Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E
Gross sales 9,220 8,737 6,141 8,847 10,278 13,562
Less: Excise duty 660 859 461 708 514 678
Net Sales 8,560 7,878 5,680 8,139 9,764 12,884
Other operating income - - - - - -
Total operating income 8,560 7,878 5,680 8,139 9,764 12,884
% chg 120.8 (8.0) (27.9) 43.3 20.0 31.9
Total Expenditure 2,153 2,499 2,946 3,347 3,903 5,129
Net Raw Materials 984 1,352 1,906 1,961 2,465 3,317
Other Mfg costs 644 511 364 613 683 902
Personnel 260 308 365 457 419 516
Other 266 328 311 316 335 395
EBITDA 6,407 5,378 2,734 4,792 5,861 7,754
% chg 178.6 (16.1) (49.2) 75.3 22.3 32.3
(% of Net Sales) 74.8 68.3 48.1 58.9 60.0 60.2
Depreciation 156 221 285 334 382 423
EBIT 6,251 5,158 2,449 4,458 5,479 7,331
% chg 189.2 (17.5) (52.5) 82.0 22.9 33.8
(% of Net Sales) 73.0 65.5 43.1 54.8 56.1 56.9
Interest & other Charges 28 24 22 44 24 26
Other Income 231 852 931 600 874 1,275
(% of PBT) 3.6 14.2 27.7 12.0 13.8 14.9
Share in profit of Asso. - - - - - -
Recurring PBT 6,454 5,985 3,358 5,014 6,329 8,580
% chg 189.5 (7.3) (43.9) 49.3 26.2 35.6
Extraordinary Inc/(Exp.) - - - - - -
PBT (reported) 6,454 5,985 3,358 5,014 6,329 8,580
Tax 2,012 1,589 631 973 1,266 1,716
(% of PBT) 31.2 26.6 18.8 19.4 20.0 20.0
PAT (reported) 4,442 4,396 2,728 4,041 5,063 6,864
Add: Share of associates - - - - - -
Less: Minority interest (MI) - - - - - -
Extraordinary Exp./(Inc.) - - - - - -
PAT after MI (reported) 4,442 4,396 2,728 4,041 5,063 6,864
ADJ. PAT 4,442 4,396 2,728 4,041 5,063 6,864
% chg 201.7 (1.0) (38.0) 48.2 25.3 35.6
(% of Net Sales) 51.9 55.8 48.0 49.7 51.9 53.3
Basic EPS (Rs) 105.1 104.0 64.6 95.6 119.8 162.4
Fully Diluted EPS (Rs) 105.1 104.0 64.6 95.6 119.8 162.4
% chg 201.7 (1.0) (38.0) 48.2 25.3 35.6
April 21, 2010 6

7. Hindustan Zinc I 4QFY2010 Result Update
Balance Sheet Rs crore
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 423 423 423 423 423 423
Reserves& Surplus 7,205 11,426 13,935 17,680 22,545 29,211
Shareholders Funds 7,627 11,848 14,358 18,102 22,968 29,634
Share Warrants - - - - - -
Minority Interest - - - - - -
Total Loans 0.4 0.4 9 9 9 9
Deferred Tax Liability 301 460 559 559 585 597
Total Liabilities 7,928 12,308 14,925 18,670 23,562 30,239
APPLICATION OF FUNDS
Gross Block 3,500 5,182 5,856 6,983 8,110 9,037
Less: Acc. Depreciation 1,264 1,485 1,751 2,085 2,467 2,890
Net Block 2,236 3,697 4,105 4,898 5,643 6,147
Capital Work-in-Progress 635 465 1,108 1,308 1,108 408
Goodwill - - - - - -
Investments 4,403 6,332 6,929 6,929 6,929 6,929
Current Assets 1,481 2,712 3,784 6,800 11,115 18,186
Cash 120 1,363 2,719 5,580 9,526 16,217
Loans & Advances 305 384 313 313 345 345
Other 1,057 965 751 906 1,244 1,624
Current liabilities 827 898 1,001 1,265 1,233 1,431
Net Current Assets 654 1,813 2,783 5,535 9,881 16,755
Mis. Exp. not written off - - - - - -
Total Assets 7,928 12,308 14,925 18,670 23,562 30,239
Cash Flow Statement Rs crore
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Profit before tax 6,454 5,985 3,358 5,014 6,329 8,580
Depreciation 157 222 286 334 382 423
Change in Working Capital 238 376 296 (87) (297) (229)
Less: Other income (144) (767) (777) - - -
Direct taxes paid 1,958 1,529 521 876 1,213 1,658
Cash Flow from Operations 4,747 4,288 2,642 4,386 5,201 7,116
Inc./ (Dec.) in Fixed Assets 1,110 1,513 1,374 1,327 927 227
Inc./ (Dec.) in Investments 2,798 1,407 443 - - -
Inc./ (Dec.) in loans and advances 142 80 (71) - 31.3 -
Other income 178 226 (1,602) - - -
Cash Flow from Investing 3,872 2,774 3,348 1,327 958 227
Issue of Equity - - - - - -
Inc./(Dec.) in loans (558) - 8 - - -
Dividend Paid (Incl. Tax) 240 247 124 198 297 198
Others 31 24 22 - - -
Cash Flow from Financing (829) (271) (137) (198) (297) (198)
Inc./(Dec.) in Cash 46 1,243 (844) 2,861 3,946 6,691
Opening Cash balances 74 120 3,563 2,719 5,580 9,526
Closing Cash balances 120 1,363 2,719 5,580 9,526 16,217
April 21, 2010 7

8. Hindustan Zinc I 4QFY2010 Result Update
Key Ratios
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Valuation Ratio (x)
P/E (on FDEPS) 11.7 11.8 19.1 12.9 10.3 7.6
P/CEPS 11.3 11.3 17.3 11.9 9.6 7.1
P/BV 6.8 4.4 3.6 2.9 2.3 1.8
Dividend yield (%) 0.4 0.4 0.3 0.5 0.3 0.3
EV/Sales 5.6 5.6 7.5 4.9 3.6 2.2
EV/EBITDA 7.4 8.2 15.5 8.3 6.1 3.7
EV / Total Assets 6.0 3.6 2.8 2.1 1.5 1.0
Per Share Data (Rs)
EPS (Basic) 105.1 104.0 64.6 95.6 119.8 162.4
EPS (fully diluted) 105.1 104.0 64.6 95.6 119.8 162.4
Cash EPS 108.8 109.3 71.3 103.6 28.9 172.5
DPS 5.0 5.0 4.0 6.0 4.0 4.0
Book Value 180.5 280.4 339.8 428.4 543.6 701.3
Dupont Analysis
EBIT margin 73.0 65.5 43.1 54.8 56.1 56.9
Tax retention ratio (%) 68.8 73.4 81.2 80.6 80.0 80.0
Asset turnover (x) 2.5 1.7 1.1 1.3 1.4 1.8
ROIC (Post-tax) 126.3 82.1 37.7 58.3 61.7 82.7
Cost of Debt (Post Tax) - - - - - -
Leverage (x) (0.6) (0.6) (0.7) (0.7) (0.7) (0.8)
Operating ROE 51.4 28.8 12.4 18.0 17.5 18.1
Returns (%)
ROCE (Pre-tax) 102.8 51.0 18.0 26.5 25.9 27.3
Angel ROIC (Pre-tax) 209.9 128.6 49.5 77.9 82.6 103.2
ROE 80.3 45.1 20.8 24.9 24.7 26.1
Turnover ratios (x)
Asset Turnover (Gross Block) 2.6 1.8 1.0 1.3 1.3 1.5
Inventory / Sales (days) 84.6 75.7 67.6 67.6 75.0 75.0
Receivables (days) 23.7 20.6 10.6 11.0 15.0 15.0
Payables (days) 35.0 51.8 46.1 48.0 45.0 45.0
WC cycle (ex-cash) (days) 37.1 33.7 30.4 17.1 21.4 23.7
Solvency ratios (x)
Net debt to equity (0.6) (0.6) (0.7) (0.7) (0.7) (0.8)
Net debt to EBITDA (0.7) (1.4) (3.5) (2.6) (2.8) (3.0)
Interest Coverage 219.8 213.4 111.9 101.5 225.6 278.8
April 21, 2010 8

9. Hindustan Zinc I 4QFY2010 Result Update
Research Team Tel: 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement Hindustan Zinc
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies’ Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below Rs 1 lakh for Angel and its Group companies.
Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059.
Tel: (022) 3952 4568 / 4040 3800
Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE:
INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946
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CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302
April 21, 2010 9