The 2QFY09 results of Hindustan Zinc Ltd (HZL) were above our estimates. Net sales
stood at Rs17.4bn (yoy down 12.1%, qoq up 6.1%), EBITDA stood at Rs9.4bn (yoy
down 34.1%, qoq down 4.3%) and PAT stood at Rs9.6bn (yoy down 16.5%, qoq up
13.1%). HZL reported EPS of Rs22.67. Zinc volume grew by 29.3% on yoy basis to
121,556t. During the quarter, the company has reported effective tax rate (ETR) of 12%
(yoy down 1,229bps, qoq down 1,214bps). The reduction in ETR was primarily due to
various tax saving initiatives undertaken by the company including conversion of one
of the zinc smelter at Chanderiya into 100% EOU in May 2008. In 2QFY09, HZL
reported zinc and lead concentrate sales of 97,000DMT. The capacity expansion
projects to increase the zinc-lead smelting capacities to 1.065mtpa with matching
mining and captive power generation capacities are progressing as per schedule. As
on 30th Sep ’08, HZL has cash balance of Rs92bn. At the CMP of Rs288, the stock is
trading at4.5x FY09E EPS of Rs64.23 and at 4.2x FY10E EPS of Rs67.93

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