Ventura 27 Jan 2025
Hindustan Zinc Limited (HZL), a Vedanta Group company, is not only the largest and the only integrated producer of zinc, lead and silver in India, but one of the lowest cost zinc producer globally. HZL has 5 operational mines located in Rajasthan and is currently working on the excavation of an additional mine, with a mine life spanning 25+ years (at the current mining rate).
Global demand for base metals – zinc and lead is expected to grow at a CAGR of 6%/7% to 19.1million/13.3 million. Domestically, India is a net exporter of zinc while having a deficit in lead supplies. Both these circumstances are favourable to HZL. Silver is fast gaining traction for investment demand and its use cases in industrial applications is only rising. The timely expansion in silver production capacities augers well given the exploding demand.
HZL is expected to expand its mined production to 1.2 million tonnes in FY27 from 1 million tonnes with refined zinc/lead production increasing from 817/216 kt to 931/240 kt. Silver (by product of lead concentrate) is expected to increase from 746 to 800 tonnes. We expect revenue to grow at a CAGR of 9% to INR 37,152 cr during FY24-27E aided by capacity expansion and a strong demand outlook. Zinc/lead/silver/other sources (sulphuric acid and wind energy) revenue is expected to increase at a CAGR of 11% / 3% / 7% / 5% to INR 24,425/ 4,438/ 6,636/ 1,654 crore respectively.
Due to power cost saving measures and operating leverage, EBITDA and PAT are expected to reach INR 19,142 Cr and INR 11,402 Cr by FY27 respectively. Consequently, EBITDA/PAT margins are expected to improve to 51.5% (+430bps)/30.7% (+350bps) by FY27 respectively. Return Ratio ROE is expected to dip by 550 bps to 45.6% while ROIC is expected to increase by 2960 bps to reach 102.4% respectively.
HZL has planned capex of ~INR 16000 crore (including sustaining capex) for the period FY24-27 for funding the roaster plant at Debari, fumer and fertilizer plant at Chanderiya (sulphuric acid forward integration) and 450 MW renewable energy addition. Despite the heavy capex, HZL is expected to turn net debt free by FY26.