Vedanta-backed one zinc stock has been exploding impressively and mind-bogglingly in 2024. Becoming a top 2024 winner, Vedanta-backed Hindustan Zinc has more than doubled its investors. Riding on the back of bulls with back-to-back 20% upper circuits, Hindustan Zinc shares crossed the Rs 800 mark. However, on May 23, the stock witnessed sharp selling, does that mean the rally party is starting to pack up?
Hindustan Zinc Share Price:
Hindustan Zinc shares halted its six-consecutive sessions winning streak and fell by 4.2% on May 23, 2024, to end at Rs 740.55 apiece with a market cap of Rs 3,12,906.00 crore.
In the previous session, Hindustan Zinc shares touched a new all-time high of Rs 807 apiece. At this level, HZL's shares have skyrocketed by 183.2% from its 52-week low of Rs 285 apiece which was recorded on March 15, 2024. That being said, HZL's shares rallied by an extraordinary 183% from March 15 to May 22.
Hindustan Zinc is the biggest winner of 2024, with gains of 133% on BSE year-to-date, while its six-monthly performance is an upside of 146%. Also, in a year, the stock rallied by 142%.
The reason why Hindustan Zinc shares have risen tremendously is due to a spike in base metal prices amidst China's announcement of reviving its debt-laden real estate sector.
In its research note, Tushar Chaudhari, Research Analyst,Prabhudas Lilladher said, "Indian benchmark HRC prices increased by Rs100/t WoW to Rs 54,000/t. Spot spreads increased 1% WoW to Rs 25,040/t led by decline in coking coal prices," adding, "Chinese and European HRC prices declined 0.9% and 0.8% WoW to USD 540/t and USD 595/t respectively. Spot spreads declined 5% and 4% WoW respectively to USD 147/t and USD 202/t as iron ore prices increased during the week to USD 119/t (+2.9% WoW) offset by a 1.1% WoW decline in coking coal prices to USD 237/t."
Chaudhari explained that the Chinese government rolled out a string of much-anticipated stimulus and policy measures aimed at the property market. They started loosening home-buying restrictions across several major cities. Local media reported that Beijing will encourage state governments to begin buying up some houses from the open market. These measures came as China began a massive 1 trillion yuan ($138 billion) bond issuance, which is aimed at sprucing up infrastructure spending.
Further, Chaudhari said, "These measures came as China began a massive 1 trillion yuan ($138 billion) bond issuance, which is aimed at sprucing up infrastructure spending.
On the valuation, as per Chaudhari, domestic steel players have taken price hikes in May and expect further increases in Longs as Flats continue to get affected by imports. Domestic demand remains stable. Lower coking coal prices coupled with stable steel pricing shall aid margins in 1HFY25. Chinese measures and a sharp rally in LME prices drove stocks however we advise a cautious approach given weak Europe and higher valuation multiples due to the recent rally.
Hindustan Zinc Dividend:
Recently, the company's share turned ex-dividend on May 15, for an interim dividend of Rs 10 per share which is 500% on a face value of Rs 2 per share for FY25. The payout is Rs 4,225.32 Crore.
For FY24, the company paid dividends up to 1,150% amounting to Rs 23 per share. On the current price level, the dividend yield is 4.07%.
Hindustan Zinc Earnings:
In Q4FY24, Hindustan Zinc's revenue from operations during the quarter was Rs 7,549 Crore, up 3% q-o-q on account of better zinc volumes partly offset by lower lead & silver volumes, and lower metal prices. The revenue plunged by 11% y-o-y on account of significantly lower zinc & lead prices and lower lead volume, partly offset by increased zinc & silver volumes, silver prices and favourable exchange rates.
While Hindustan Zinc's net profit for the quarter stood at Rs 2,038 Crore, marginally up sequentially and down 21% y-o-y. FY24 net profit was at Rs 7,759 Crore, down 26% y-o-y, primarily on account of lower EBITDA partly offset by lower tax expense.
Apart from dividend payout, Hindustan Zinc has also delivered 1 bonus share of 1:1 ratio in March 2011, while it turned ex-split also in March 2011 for 1:5 ratio. The face value of the stock of Rs 10 was reduced to Rs 2.
BUY/SELL Hindustan Zinc:
Owing to overvaluation, the consensus recommendation from 12 analysts for Hindustan Zinc Ltd. is SELL, as per Trendlyne data. However, EPS is expected to grow by 30.6% in FY25. The average 1-year target price is now at Rs 336, hinting at a 55% downside.
Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the stock mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.
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