Buy Hindustan Zinc; later part of year to be stronger due to potential zinc deficit #BrokerAdvice http://goo.gl/KWpgxt

1. CMP 164.30
Target Price 190.00
ISIN: INE267A01025
JULY 22nd
, 2015
HINDUSTAN ZINC LIMITED
Result Update (PARENT BASIS): Q1 FY16
BUYBUYBUYBUY
Index Details
Stock Data
Sector Metals (Zinc)
BSE Code 500188
Face Value 2.00
52wk. High / Low (Rs.) 190.40/152.50
Volume (2wk. Avg. Q.) 77000
Market Cap (Rs. in mn.) 694216.79
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY15A FY16E FY17E
Net Sales 147883.90 160601.92 172486.46
EBITDA 102406.30 110021.71 118155.55
Net Profit 81780.00 89972.58 96957.92
EPS 19.35 21.29 22.95
P/E 8.49 7.72 7.16
Shareholding Pattern (%)
1 Year Comparative Graph
HINDUSTAN ZINC LIMITED BSE SENSEX
SYNOPSIS
Hindustan Zinc Ltd (HZL) is one of the world’s largest
integrated producers of Zinc-Lead and a leading
producer of Silver globally.
Net sales of the company rose by 20.72% to Rs.
36301.70 million in 1st quarter of FY16 from Rs.
30071.90 million in the corresponding quarter last
year.
In Q1 FY16, net profit increased by 18.74% y-o-y at
Rs.19208.00 million against Rs. 16176.70 million in Q1
FY15.
Profit before tax (PBT) Jumps to 10.20% in the June
quarter of current year and stood at Rs. 20495.40
million compared to Rs. 18598.90 million in the same
quarter previous year.
In Q1 FY16, EBITDA increased by 7.45% y-o-y of Rs.
22240.70 million as against Rs. 20697.80 million in
corresponding quarter of the previous year.
Revenues from zinc & lead segment rose up by 27% of
Rs.32856.40 million for Q1 FY16 as compared to
Rs.25861.50 million for Q1 FY15.
Integrated saleable zinc, lead and silver metal
production during the quarter increased by 35%, 27%
and 33% respectively compared to a year ago.
During the quarter, North ventilation shaft was
completed at Rampura Agucha. Pre-stripping for
further deepening of the open pit at Rampura Agucha
is under progress.
Net Sales and PAT of the company are expected to
grow at a CAGR of 8% and 9% over 2014 to 2017E
respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Hindustan Zinc Ltd 164.30 694216.79 19.35 8.49 1.60 220.00
National Aluminum Ltd 38.05 98063.90 5.13 7.42 0.81 35.00
Alicon Castalloy Ltd 316.90 3485.90 16.32 19.42 2.64 60.00

2. QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results updates- Q1 FY16,
Hindustan Zinc Ltd. is the world’s largest integrated
producer of Zinc-Lead. It has a metal production
capacity of over 1.0 million MT per annum, has
reported its financial results for the quarter ended
30th June, 2015.
The company has registered its net sales of Rs. 36301.70 million for the 1st quarter of the financial year 2016 as
against Rs. 30071.90 million in the corresponding quarter of the previous year. The increase was driven by
higher zinc volumes & LME prices and rupee depreciation. This was partly offset by lower prices & volumes of
silver and lead as also lower zinc premium. The company has reported an EBITDA of Rs. 22240.70 million, an
increase of 7.45% y-o-y against Rs. 20697.80 million in corresponding quarter of the previous year, due to higher
revenues and lower cost of production, partly offset by one-time expense related to renewable energy purchase
obligation for earlier years, In Q1 FY16, net profit grown by 18.74% y-o-y of Rs. 19208.00 million against Rs.
16176.70 million in Q1 FY15. This has driven by higher operating profit, partly offset by lower investment
income due to mark to market losses on a small portion of the portfolio, which is expected to get recovered in the
coming quarters. The company has registered an EPS of Rs. 4.55 for the June quarter of current financial year as
against an EPS of Rs. 3.83 in the corresponding quarter of the previous year.
Break up of Expenditure:
During the quarter, Total expenditure rose up by 15 per cent, mainly on account of Employee Benefit Expenses
by 17%, Mining Royalty 217%, Other Mining & Manufacturing Expenses 25% and Power & fuel 136% are the
main attribute for the increase of Expenditure when compared to corresponding quarter of the previous year.
Total expenditure in Q1 FY16 stood to Rs. 21427.40 million as against Rs. 18570.70 million in Q1 FY15.
Rs. in million Jun-15 Jun-14 % Change
Net Sales 36301.70 30071.90 20.72
PAT 19208.00 16176.70 18.74
EPS 4.55 3.83 18.74
EBITDA 22240.70 20697.80 7.45
Particulars
Rs. Millions
Q1 FY16 Q1 FY15
Cost of Material Consumed 411.30 1498.90
Other Expenditure 1344.20 1288.00
Power & Fuel 5369.20 2276.40
Depreciation & Amortization Expense 1729.20 2022.90
Employee Benefit Expenses 1900.20 1617.40
Consumption of Stores & Spare Parts 2499.00 2962.00
Other Mining & Manufacturing Exp 4578.40 3665.40
Mining Royalty 6290.80 1986.80

3. Segment Revenue
Latest Updates
• Total Income is Rs. 41938.90 million for the quarter ended June 30, 2015 where as the same was at Rs.
37245.60 million for the quarter ended June 30, 2014.
Operational Performance during the 1st Quarter of FY 2015-16.
• Mined metal production increased by 42% at 232,162 MT during the quarter, as compared with 163,131 MT
a year ago. The increase was driven primarily by higher ore production from Rampura Agucha, Kayad and
Sindesar Khurd mines.
• Integrated saleable zinc, lead and silver metal production during the quarter increased by 35%, 27% and
33% respectively compared to a year ago.
• The zinc metal cost of production before royalty during the quarter was Rs. 50955 ($802), which is lower by
19% in USD term from a year ago., due to higher volumes and lower commodity prices, partly offset by
higher Power & Fuel cost on account of water cess & electricity duty and renewable energy purchase
obligation on captive power consumption which had an impact of $48 per MT on COP.
Expansion Projects
• During the quarter, North ventilation shaft was completed at Rampura Agucha. Pre-stripping for further
deepening of the open pit at Rampura Agucha is under progress.
• Kayad mine ramp up is on track and expected to achieve 1 million MT production capacity by yearend.

4. Sales Performance in Product wise
COMPANY PROFILE
Hindustan Zinc Ltd is the one of the largest integrated producers of zinc-lead with a capacity of 1.0 million MT
per annum and a leading producer of silver. The Company is headquartered in Udaipur, Rajasthan in India and
has zinc-lead mines at Rampura Agucha, Sindesar Khurd, Rajpura Dariba, Zawar and Kayad; primary smelter
operations at Chanderiya, Dariba and Debari, all in the state of Rajasthan; and finished product facilities in the
state of Uttarakhand. Hindustan Zinc is a subsidiary of the BSE, NSE and NYSE listed Sesa Sterlite Limited, a part
of London listed FTSE 100 diversified metals and mining major, Vedanta Resources plc.
Hindustan Zinc has a world-class resource base with total reserves & resources of 375.1 million MT and average
zinc-lead reserve grade of 11.5%. The Company has a track record of consistently growing its reserves &
resource base since 2003 and currently has a mine life of over 25 years.
Business Activities
HZL core business comprises of mining and smelting of zinc and lead along with captive power generation. It
manufacturers three qualities of zinc -- special high grade zinc used in construction, infrastructure, household
appliances etc; high grade zinc and prime western zinc.
HZL manufactures 99.99% pure lead used in lead acid battery, ceramic glazes, electrodes, etc. It manufactures
silver used in photographic material, conducter, jewellery, etc. The mineral major produces cadmium, whose
purity ranges from 99.95-99.99%. It is used in Ni-Cd batteries, stablizers, coating and alloys. HZL also
manufactures sulphuric acid used in fertilizers, dyes, textiles, sugar refining, etc.
The Company is self-sufficient in power with an installed base of 474 MW coal-based captive power plants.
Additionally, it has green power capacity of 309 MW including 274 MW of wind power and 35 MW of waste heat
power. The company has an operating workforce of over 18,000 including contract workforce.
Products
Rs. (in millions)
Q1 FY16 Q1 FY15 CHNG %
Zinc 27870.00 20570.00 35%
Lead 4110.00 4520.00 -9%
Silver 2590.00 3180.00 -19%
Others 1390.00 1360.00 2%
Total 35960.00 29630.00 21%

5. The worlds largest integrated Zinc-Lead producer; it is and one of the lowest cost producers in the world.
Hindustan is also one of the leading Silver producers globally. It has mining, smelting and power operations in
multiple locations throughout India. The principal products are: refined Zinc metal and refined Lead metal. In
addition it recovers Silver, Cadmium and Sulphuric acid.
Products
India's largest and the world's second largest integrated zinc-lead producer; and also one of the lowest cost zinc-
lead producers in the world. We have mining, smelting and power operations in multiple locations throughout
India
ZINC
• Galvanizing
• Zinc Oxide
• Die Casting
• Alloys
• Rolled Zinc
Silver
o Silverware
o Jewellery
o Silver plating
o Photography
o Dentol alloys
Lead
o SLI ( Starting Lighting Ignition) batteries
o Industrial batteries
Cadmium

6. FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at 31st
March, 2014 -2017E FY-14A FY-15A FY-16E FY-17E
I EQUITY AND LIABILITY
A) Shareholder's Funds
a) Share Capital 8450.60 8450.60 8450.60 8450.60
b) Reserves and Surplus 365725.50 425080.10 483741.15 543725.06
Sub-Total Net worth 374176.10 433530.70 492191.75 552175.66
B) Non Current Liabilities
a) Deferred Tax Liabilities 16581.10 25186.20 31835.36 36610.66
b) Other Long term liabilities 563.70 1320.80 1827.99 2412.94
Sub-Total Non Current Liabilities 17144.80 26507.00 33663.34 39023.60
C) Current Liabilities
a) Trade payables 5103.20 6307.90 7657.79 8921.33
b) Other Current Liabilities 10184.80 10459.10 11023.89 11751.47
c) Short term Provisions 10157.80 13115.30 16262.97 18702.42
Sub-Total Current Liabilities 25445.80 29882.30 34944.65 39375.22
TOTAL EQUITY AND LIABILITIES (A + B + C) 416766.70 489920.00 560799.75 630574.48
II APPLICATION OF FUNDS
D) Non-Current Assets
i. Tangible assets 90234.30 93290.50 95156.31 96107.87
ii. Intangible assets 1238.20 1171.20 1206.34 1230.46
iii. Capital Work in Progress 15409.40 20047.10 24357.23 28741.53
a) Sub- Total Fixed Assets 106881.90 114508.80 120719.87 126079.86
b) Non-current investments 28.10 0.00 0.00 0.00
c) Long Term loans and advances 29393.60 43373.20 58987.55 73734.44
Sub-Total Non-Current Assets 136303.60 157882.00 179707.42 199814.30
E) Current Assets
a) Current Investment 225035.80 272535.90 312714.74 353490.57
b) Inventories 11982.40 12117.50 12650.67 13030.19
c) Trade receivables 3995.10 6588.20 9421.13 12247.46
d) Cash and Bank Balances 30314.20 35315.10 40400.47 45652.54
e) Short-terms loans & advances 3349.30 3641.40 3910.86 4145.52
f) Other current assets 5786.30 1839.90 1994.45 2193.90
Sub-Total Current Assets 280463.10 332038.00 381092.33 430760.18
TOTAL ASSETS ( D+E ) 416766.70 489920.00 560799.75 630574.48

7. Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY17E
Description 12m 12m 12m 12m
Net Sales 136360.40 147883.90 160601.92 172486.46
Other Income 18993.90 28210.50 30523.76 33637.18
Total Income 155354.30 176094.40 191125.68 206123.64
Expenditure -66745.20 -73688.10 -81103.97 -87968.09
Operating Profit 88609.10 102406.30 110021.71 118155.55
Interest -449.40 -235.10 -246.86 -253.27
Gross profit 88159.70 102171.20 109774.85 117902.28
Depreciation -7845.90 -6441.90 -6119.81 -6456.39
Exceptional Items -616.70 -28.10 0.00 0.00
Profit Before Tax 79697.10 95701.20 103655.05 111445.88
Tax -10650.90 -13921.20 -13682.47 -14487.96
Net Profit 69046.20 81780.00 89972.58 96957.92
Equity capital 8450.60 8450.60 8450.60 8450.60
Reserves 365725.50 425080.10 483741.15 543725.06
Face value 2.00 2.00 2.00 2.00
EPS 16.34 19.35 21.29 22.95
Quarterly Profit & Loss Statement for the period of 31 DEC, 2014 to 30 SEP, 2015E
Value(Rs.in.mn) 31-Dec-14 31-Mar-15 30-Jun-15 30-Sep-15E
Description 3m 3m 3m 3m
Net sales 38531.40 41256.80 36301.70 40440.09
Other income 8121.50 5948.80 5637.20 6595.52
Total Income 46652.90 47205.60 41938.90 47035.62
Expenditure -17639.40 -21472.60 -19698.20 -20017.85
Operating profit 29013.50 25733.00 22240.70 27017.77
Interest -7.90 -138.10 -16.10 -7.73
Gross profit 29005.60 25594.90 22224.60 27010.04
Depreciation -2090.10 -268.00 -1729.20 -1746.49
Profit Before Tax 26915.50 25326.90 20495.40 25263.55
Tax -3121.80 -5352.50 -1287.40 -3233.73
Net Profit 23793.70 19974.40 19208.00 22029.82
Equity capital 8450.60 8450.60 8450.60 8450.60
Face value 2.00 2.00 2.00 2.00
EPS 5.63 4.73 4.55 5.21

8. Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 16.34 19.35 21.29 22.95
EBITDA Margin (%) 64.98% 69.25% 68.51% 68.50%
PBT Margin (%) 58.45% 64.71% 64.54% 64.61%
PAT Margin (%) 50.64% 55.30% 56.02% 56.21%
P/E Ratio (x) 10.05 8.49 7.72 7.16
ROE (%) 18.45% 18.86% 18.28% 17.56%
ROCE (%) 25.78% 25.11% 23.60% 22.57%
EV/EBITDA (x) 4.95 3.77 3.10 2.50
Book Value (Rs.) 88.56 102.60 116.49 130.68
P/BV 1.86 1.60 1.41 1.26
Charts

9. OUTLOOK AND CONCLUSION
At the current market price of Rs. 164.30, the stock P/E ratio is at 7.72 x FY16E and 7.16 x FY17E
respectively.
Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.21.29 and
Rs.22.95 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 9% over 2014 to 2017E
respectively.
On the basis of EV/EBITDA, the stock trades at 3.10 x for FY16E and 2.50 x for FY17E.
Price to Book Value of the stock is expected to be at 1.41 x and 1.26 x respectively for FY16E and FY17E.
The company anticipates later part of the year to be stronger on expectation of global zinc deficit due to mine
closures. Indian manufacturing sector is showing signs of recovery with improved order books and flow of
funds backed by Government initiatives, thus providing a positive outlook for the industry.” We recommend
‘BUY’ in this particular scrip with a target price of Rs.190.00 for Medium to Long term investment.
INDUSTRY OVERVIEW
Zinc
Global zinc demand witnessed a 4.3% growth in 2014 against the previous year growth of 3.8%, an indication
that zinc continues to have positive fundamentals despite the lingering pressure on commodity market. Refined
zinc production growth declined from 3.9% last year to 3.3% in 2014. The deficit of 516 kt in 2014 is an
indication of the widening gap between the global zinc demand and its supply, although it has fallen short of the
700 kt gap estimated at the beginning of the year. This was primarily due to Chinese smelters operating at higher
utilization rates on the back of improved metal prices and higher treatment charges. China's export figures
peaked in 2014, driven by the local price arbitrage as well as weak demand in China, although it remained a net
importer of zinc by 440 kt, lowest since 2010. With adequate availability of concentrate in 2015 and the potential
to increase production further, China's zinc smelting output continues to be one of the key uncertainty factors
surrounding the zinc market. Demand growth would create the need for 4 million MT a year of new zinc
production by 2020. Even if the entire population of currently identified probable projects were built, it would
only replace 2.2 million MT of the requirement, at an estimated cost of $8 billion.
The outlook for Indian steel and zinc market in FY 2016 remains positive and expect CAGR of around 6% in zinc
demand in the coming years. The 'Make in India' programme of the government and its supporting policies is
expected to provide immense potential to the Indian metal market. The government envisions 300 million MT of
steel capacity for the country by 2025, against the current capacity of about 100 million MT. In the recently
announced union budget, the government has placed thrust on infrastructure projects such as upgradation of

10. railway stations, new airports and road projects, developing 100 smart cities, rural electrification projects and
investment in transmission corridors etc., which will further boost the country's zinc demand.
Lead
For several years, lead supply has been exceeding demand. During 2014, the market moved back into deficit,
although only marginally by 48 kt. Global lead demand witnessed a growth of 3.7% over last year while the
primary refined lead production growth was higher at 4.9%. Total global lead supply witnessed a slower growth
rate of 2.2% due to flat secondary production. Despite reductions in Peruvian and US output, influenced by the
closure of operations at La Oroya in June 2014 and Herculaneum in December 2013 respectively, global output of
refined lead metal increased principally due to higher production in China, India, Italy, Kazakhstan and the
Republic of Korea. China's e-bike is a major market for lead consumption, which is levelling off to market
saturation and witnessed reduced growth for the second consecutive year.
The overall trend in 2015 for global lead market is likely to be marginally bullish with an estimated demand
growth rate of 4%. The coming years are promising for Indian automobile industry amid falling fuel prices and
interest rates as well as government stimulus for foreign investments. India is expected to be among the world's
top four auto producers by FY 2016 which will lead to a surge in lead consumption in the country.
Silver
Global silver mine production witnessed a growth of about 3.5% in 2014 while the physical demand declined by
6.7%. Despite the downtrend, the year ahead appears positive and is expected to register a growth of 1.4%. From
watch batteries to massive solar energy systems, the special properties of silver are often indispensable in
industrial applications, including silver coated bearings, catalysts, medical care and many products in our daily
lives. Along with technological improvements, more and more applications of silver have been developed and
commercialised. In the Indian context, the metal is primarily used in jewellery and for investments. Global
industrial demand for silver is expected to grow by 27% in the next four years and the demand of silver in the
subcontinent is expected to regain its lustre.
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