Here is our detailed research report on Hindustan Zinc.

Company Profile:

Hindustan Zinc Ltd. is the only Integrated Miner in India. Incorporated in the year 1966, Hindustan Zinc has got rich experience of more than five decades in Zinc – lead mining and smelting. Ranked #1 in the Metals and Mining Category in the Asia Pacific in Dow Jones Sustainability Index 2019,  HZL is one of the lowest-cost producers of zinc globally and it is India’s Only Integrated producer of Zinc, Lead, Silver. HZL’s facilities are located in Rampura Agucha, Chanderiya, Dariba, Kayad and Zawar in Rajasthan, along with zinc-lead processing and refining facilities and a silver refinery at Pantnagar in Uttarakhand. HZL is a listed company and a subsidiary of Vedanta Ltd., which owns a 64.9% equity stake, with a 29.5% stake owned by the Government of India. It won big at ESG India Leadership Awards.


Hindustan Zinc has various products under segments : 

Zinc – Special High-Grade zinc products are LME registered products under the brand names HZL SHG 99.995, HZL Zn SHG 99.995, Vedanta SHG 99.995, and Vedanta Zn SHG 99.995 which are used in Die-castings, corrosion protection, etc.

Lead – Lead ingots with min 99.99% purity are registered with LMEunder the following brand names Vedanta 99.99 and Vedanta Pb 99.99 which are used in a number of applications including battery segment, lead-based pigments, and cathode-ray tubes. 

Silver – High-quality silver bullion having a minimum purity of 99.9% in the  forms of bars and powders 

Stock Holding Pattern:

 Key Rationale:

Dominant Market Position – The company runs integrated zinc lead-silver operations with zinc, lead and silver smelting capacity of 913,000  tonnes per annum (TPA), 210,000tpa, and 800tpa, respectively, at FY21,  through three plants along with captive power plants of 485.5 megawatts in total. HZL is a leading zinc miner globally with a market share by volume of about 77% in FY21 in India, according to the management. The company’s operations are integrated from mining to smelting. Operating Performance – The mined metal production was up 6%  YoY to 972kt in FY21, mainly due to the higher ore production partially impacted by low grades. This was despite losing 18 days equivalent of production in FY21 due to the COVID-19-led lockdown and other workforce-related restrictions. In FY21, the refined metal production was up  7% YoY to 930kt and the silver production was up 16% YoY to a record 706 tonnes due to higher lead production and improved silver grades. In FY21,  HZL reached a run rate of 1.2 million tonnes per annum and is poised to deliver higher volumes in FY22. HZL’s FY21 EBITDA margins increased marginally to 51.6% over FY20’s 47.7%, supported by the improved realizations and the lower cost of production. HZL met about 77% of the domestic market requirements. Overall, HZL’s exports are generally in the range of 15%-20% of its total sales. Healthy reserve life and low cost of production – HZL’s overall mineral reserves increased to 150.3mt in FY21 (FY20: 114.7mt), ensuring a  minimum mine life of over nine years basis the reserves at the FY21  run rate of operations. However, considering the measured, indicated, and inferred resources, the mine life is over 25 years at the FY21 run-rate of operations. The average ore grades were zinc at 6.1% and lead at  1.7% at FY21. HZL produced 0.93mmt of integrated metal in FY21 (FY20:  0.87mmt). HZL is in the first quartile composite cost of production globally, given the fully integrated nature of operations, according to the management. In FY21, the cost of production (excluding the royalty) was down 9% YoY (5% lower YoY in INR), primarily on account of higher metal volume and lower conversion costs, partly offset by higher fuel costs. Financial Performance – The Company has generated a  strong cash flow from operations of around Rs.10,500crs in FY21, driven by a  sharp increase in the metal prices, lower cost of production, and higher metal production volume. It is expected to continue reporting strong operating cash flows in FY22, due to the favorable pricing environment and higher volumes. The total debt in FY21 rose to ~Rs.7200crs (FY20: Rs.610crs)  mainly to fund capital expenditure and working capital requirements.  The company can maintain a strong balance sheet despite the CAPEX program due to its strong cash flow generation and limited debt. 

Growth Drivers 

FDI up to 100% is allowed in exploration, mining, minerals processing metallurgy, and exploration of metal and non-metal ores under the automatic route for all non-fuel and non-atomic minerals including diamonds and precious stones. Central Government to establish National Mineral Fund, while individual state governments to establish State Mineral Fund(s). District Mineral Foundation will be set up by the State Government and will work for the interest and benefit of persons or families affected by the mining-related operation in the district – it will be managed by a governing council. The Government of India has allocated Rs.111 lakh crore (US$ 1.4 trillion) under the National Infrastructure Pipeline (NIP) for FY2019- 25. Sectors such as energy (24%), roads (18%), urban (17%), and railways (12%) account for ~71% of the projected infrastructure investments in the country. 

 Peer Analysis 

Competitors: Hindustan Copper, Vedanta, MOIL, etc. HZL is India’s only and the world’s second-largest zinc-lead-silver producer. Since it is a monopolistic player in the zinc space, it can be  compared with other metal and mining players  


The company continues to gain from higher production and improved prices. We expect demand to grow with a reduction in COVID cases and acceleration in vaccination drive despite the increase in commodity prices. The cost control measures will improve operational efficiencies. Hence, we recommend a BUY rating in the stock with the target price (TP) of Rs.363, 17x FY22E EPS.  

Please read our other research report on “CRISIL LTD”

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