Macquaire in its latest research report after analyzing the results of Hindustan Zinc’s Q3 performance has put a BUY recommendation on the stock with a 12 month price target of Rs 1160. HZL is one of the best mining assets, and huge possibility to add more reserves – is trading below its NPV of Rs 804 and is one of the cheapest on this basis among its global peers.
Q3 results are not in-line with market expectations but analysts are bullish that HZL will meet their expectations for the full year. Analysts expects an EPS of Rs108 for FY07, which is 8% higher than consensus. The company has already posted EPS of Rs86 in the first three quarters and shall easily surpass expectation, as zinc prices – even after three cuts in a month are near the forecast price of US$3,800/tonne.
12-month price target: Rs1,160.00 based on a PER methodology.
Catalyst: Strong earnings growth, high cash flow and sustainability of higher profits.
Outperform maintained: Given the bullish view on zinc prices in FY08 and expected 50% volume growth in FY09, Macquaire estimates sustained high profitability.