The Only Large Cap to Double in 3 Months: Do You Hold?

Hindustan Zinc Limited (HZL) has made waves in the stock market, doubling its share price in just three months. With a history dating back to 1966, HZL has established itself as a dominant player in the zinc-lead and silver industry. Let’s dive into the factors contributing to its recent surge and why you might want to consider holding onto this stock.

Dominant and Leading Player

HZL stands as the world’s second-largest integrated zinc producer and the third-largest silver producer. With a commanding 75% market share in India’s zinc market, the company operates from its headquarters in Udaipur, Rajasthan. HZL’s operations span across several zinc-lead mines and smelting complexes in the state, making it a powerhouse in the industry.

Self-Sufficient and Green Energy Initiatives

One of HZL’s key strengths is its self-sufficiency in power through captive thermal power plants. Additionally, the company has ventured into green energy by establishing wind power plants. These initiatives not only reduce operational costs but also align with global sustainability trends.

Global Presence and Revenue Mix

HZL’s exports account for 25% of its turnover, showcasing its significant global presence. For FY24, the company’s revenue mix was diversified across zinc (62%), lead (14%), silver (19%), and others (5%). This diversification helps mitigate risks associated with price fluctuations in individual commodities.

Lowest Zinc Production Costs

Backward integration and access to high-grade zinc reserves make HZL the lowest-cost producer of zinc globally. In Q4FY24, the company reported its 12th consecutive quarter of having the lowest zinc production costs.

Extensive Manufacturing Capabilities

HZL’s facilities are spread across Rampura Agucha, Chanderiya, Dariba, Kayad, and Zawar in Rajasthan, along with processing and refining facilities and a silver refinery in Pantnagar, Uttarakhand. The company boasts a mined metal capacity of approximately 1.2 million tonnes per annum (MTPA), with smelting capacities of 913,000 tonnes of zinc, 210,000 tonnes of lead, and 800 tonnes of silver per annum.

Reserves and Resources

At the end of FY24, HZL’s total reserves and resources (R&R) stood at 456.3 million tonnes, containing 30.8 million tonnes of metal. This extensive reserve base ensures over 25 years of production at current mining rates. The company holds the second-largest zinc reserves and resources globally.

Strategic Outlook for FY25

Looking ahead, HZL expects both mined metal and refined metal production to exceed FY24 levels, with targets set at 1,100-1,125 kt for mined metal and 1,075-1,100 kt for refined metal. Saleable silver production is projected between 750-775 MT, with the cost of zinc production expected to remain between $1,050-$1,100 per MT. Project capex for FY25 is estimated at $270-325 million.

Impact of Zinc Prices on Stock Rally

The recent surge in HZL’s share price is largely attributed to a significant rise in base metal prices, driven by China’s bold measures to revitalize its struggling property sector. This development has created a favorable market environment for HZL, boosting investor confidence.

Conclusion

Hindustan Zinc’s remarkable performance in the past three months underscores its strong fundamentals and strategic positioning. With robust production capabilities, low production costs, and a positive outlook, HZL is a compelling stock to hold. As the company continues to expand and capitalize on favorable market conditions, it presents a promising opportunity for investors looking to benefit from the booming zinc and silver markets.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.