Fw: Hindustan Zinc – BUY

 

Hindustan Zinc – BUY
CMP Rs1,084, Target Rs1,277, Upside 17.8%

Hindustan Zinc Ltd (HZL) is one of the best bets among the metal companies on account of the integrated nature of its business and the volume growth over the next two years. While zinc prices have rebounded sharply (up 27% since June '10) on the back of improved global economic sentiments and ample liquidity situation, HZL's stock price has gained only 10% over the same period. It has underperformed not just the Sensex but also global zinc stocks (+15%). We believe that the underperformance is unjustified and the stock should trade at par with its international peers considering the size and integrated operations of the company. Also, based on our base case, we expect acquisition of Anglo American's zinc assets to add Rs86/share to HZL's fair v alue. Cash & equivalents at he end of Q1 FY11 stood at Rs123bn, representing 27% of the company's current market cap. Even with our metal price assumptions, which are lower than the prevailing prices, we expect HZL to witness earnings CAGR of 15.1% over FY10-12E. We recommend a BUY rating on HZL for a target price of Rs1,277.

 

 

http://content.indiainfoline.com/wc/research/researchreports/Hind_Zinc_270910.pdf