Hindustan Zinc Posts Disappointing Q4FY14 Result

The topline of the company has plunged by around 7% on yearly basis to Rs 3642.68 crore during Q4FY14. The topline has reduced mainly due to reduction in sales of Zinc (down by 2 %), silver (down by 39 %) and wind energy (down by 38 %). The segment which has performed well during this quarter was lead (up by 21 %) on yearly basis. Decline in revenue during this quarter was due to no sale of metal in concentrate (MIC) however, it was partly offset by rupee depreciation.

The total expenditure of the company during the Q4FY14 stood at Rs 2091.57 crore, reporting a jump of 9.62 % on YoY basis. The increase in total expenses can be attributed to an increase in cost of raw materials (up by 181 %), depreciation (up by 67.47 %), cost on power & fuel (up by 5 %) and other mining & manufacturing expenditure (up by 27 %) during the last quarter of fiscal year 2014.

On EBITDA front, the EBITDA of the company stood at Rs 1755.22 crore, reporting a decline of more than 17 % on yearly basis during the Q4FY14. As far as margin is concerned, the EBITDA margin during the quarter plunged by 612 basis points to 48.18 % for the quarter ended March 31, 2014. The EBITDA margin has reduced mainly due to increase in total expense and due to reduction in total sales.

The company has posted a profit after tax (PAT) of Rs 1881.2 crore during Q4FY14, reporting a decline of more than 13 % on yearly basis. The PAT margin of the company has also reduced by 377 basis points to 51.64 % during Q4FY14 as compared to the same quarter of previous year. The PAT margin has plunged but the fall was lesser than the EBITDA margin during this quarter. This was due to increase in other income by 46.78 % YoY to Rs 588.66 crore during Q4FY14.

Company has also declared dividend of Rs 1.90 per share. The company had informed that the Kayad and Rampura Agucha underground mine projects have started its commercial production after facing difficulties during the initial phases. As of March 31, 2014 the company had cash and cash equivalent of Rs 25535 crore, which comes out to be Rs 58.4 per share.

On the valuation front, the company is trading at 8x of its trailing twelve months earnings, whereas the industry is trading at P/E of 12x. Today, on BSE, the stock opened at Rs 131 and closed at Rs 132. We, therefore, advise our investors, who are looking for short term investment, to stay away from this stock for the time being.