Sell Hindustan Zinc, target price Rs 289: Centrum Institutional Research

Centrum Institutional Research has a sell call on Hindustan Zinc with a target price of Rs 289. The current market price of Hindustan Zinc is Rs 308.1 .

Hindustan Zinc Ltd, incorporated in the year 1966, is a Large Cap company with a market cap of Rs 130224.33 Crore, operating in Metals - Non Ferrous sector.

Hindustan Zinc's key Products/Revenue Segments include Wind Energy, Scrap, Other Operating Revenue and Export Incentives for the year ending 31-Mar-2020.

Investment Rationale
Centrum Institutional Research expects zinc prices to fall from current levels (CMP: ~ $2,900/t) as smelters across world must be making profits and zinc market is expected to be in surplus in CY21E (~463kt) after recording surplus of 620kt in CY20E, as per International lead and zinc study group.

Centrum added, the expectation of Government of India selling its 29.5 per cent stake will keep investors interest in the stock. However, it prefers to wait for correction to enter into the stock. Centrum values the company at 7.0x FY22E EV/EBITDA and arrive at a target price of Rs 289/share. A $100/t change in zinc price changes its target price by ~3 per cent. Due to expensive valuation, it downgrades the stock to sell from reduce.

Financials
For the quarter ended 31-03-2021, the company has reported a Standalone Total Income of Rs 7242.00 Crore, up 11.71 per cent from last quarter's Total Income of Rs 6483 Crore and up 48.98 per cent from last year same quarter's Total Income of Rs 4861.00 Crore. Company has reported net profit after tax of Rs 2481.00 Crore in latest quarter.

Promoter/FII Holdings
Promoters held 64.2 per cent stake in the company as of Dec 30, 2020, while FIIs held 1.1 per cent, DIIs 2.4 per cent and public and others 32.3 per cent.