Hindustan Zinc Ltd shares will be in the spotlight on Monday morning as the company's CEO, Arun Misra, reportedly stated that they will present their demerger proposal to the board in the next 4-6 weeks. This will happen as soon as they receive the final recommendations from consultants. Hindustan Zinc's board had previously asked the Vedanta Ltd promoted company to explore corporate restructuring, aiming to create three separate entities for its lead and zinc, silver, and recycling businesses, according to a report in ET.
The demerger plan, along with the distribution of cash and debt, will be based on the recommendations from consultants, the ET report suggests. Hindustan Zinc hopes that this demerger will enhance its valuations and unlock shareholder value.
Motilal Oswal Securities has noted that Hindustan Zinc shares are currently trading at a valuation of 6.7 times FY25 EV/Ebitda and 5.6 times FY25 P/B. The brokerage has maintained its FY24 and FY25 estimates, offering a 'Neutral' rating on the stock with a target price of Rs 290.
The company has retained its guidance for FY24, indicating mined metal production around 1,075-1,100 kt and refined metal production in the range of 1,050-1,075 kt. Saleable silver production is projected to be in the range of 725-750 mt. Hindustan Zinc also expects zinc production costs in FY24 to be in the range of $1,125-1,175 per mt. Project capex for the year is expected to range from $175-200 million.
Hindustan Zinc reported a 35.4 percent YoY decrease in consolidated profit for the September quarter, amounting to Rs 1,729 crore, primarily due to lower sales and reduced zinc prices. This is compared to a consolidated profit of Rs 2,680 crore in the same quarter the previous year.
Nuvama Institutional Equities remarked, "We cut FY24E Ebitda by 4 percent to factor in lower zinc and silver volumes. We see Hindustan Zinc lacking growth (EBitda CAGR of 4 percent over FY23-26E). We rollover and value it at 6.0 times FY25E/FY26E average, which yields a fair value of Rs 253 (unchanged). Reiterate 'Reduce'."
