Hindustan Zinc's Quarterly Profits Dive 21% Amid Global Metal Price Slump, Shares Plummet; Buy Or Not?

Hindustan Zinc Ltd (HZL), a subsidiary of the Vedanta group, has reported a 21% year-on-year decline in its net profit for the fourth quarter, citing depressed zinc prices globally and a slower growth pace in demand compared to supply. The company's net profit for the quarter ended March 2024 stood at Rs 2,038 crore, down from Rs 2,583 crore in the same period the previous year. However, the sequential quarterly profit showed a marginal increase of 0.5%, reaching Rs 2,028 crore from the previous quarter.

Revenue from operations for the reporting quarter dipped by 12% to Rs 7,285 crore compared to Rs 8,281 crore a year ago. Despite the year-on-year decline, the revenue witnessed a 3% increase on a quarter-on-quarter basis. The company's consolidated earnings before interest, tax, depreciation, and amortization (EBITDA) for the quarter were Rs 3,637 crore, marking a 14% fall from Rs 4,208 crore in the corresponding quarter last year.

The decline in revenue is attributed to significantly lower prices of zinc and lead, along with reduced lead volume, partly offset by increased zinc and silver volumes, silver prices, and favourable exchange rates, according to the company's statement.

Sandeep Modi, the chief financial officer of HZL, highlighted the company's resilient margin, maintaining it at a steady 47% amidst plunging metal prices. He noted that the company achieved its fifth consecutive quarter of sustained cost reduction, recording the lowest cost in the last three years.

Following the announcement of the fourth-quarter earnings, HZL's shares witnessed a decline of 1.42% on April 19, trading at Rs 399 apiece.

Despite the challenging market conditions, HZL reported record production levels for FY24. Mined metal production reached 1,079 kilotonnes (KT), up 2% from the previous year, driven by improved mined metal grades. The March quarter witnessed a significant uptick, with mined metal production reaching 299 KT, up 11% from the previous quarter.

Additionally, FY24 saw the company achieve its highest silver volume at 24.0 million ounces (moz), marking a 5% increase year-on-year. Refined lead production stood at 216 KT, up 3% year-on-year.

Looking ahead to the fiscal year 2025, HZL anticipates further growth in both mined metal and refined metal production. The company projects mined metal production to range between 1,100-1,125 KT and refined metal production between 1,075-1,100 KT. Saleable silver production for FY25 is expected to be between 750-775 metric tonnes.

The company aims to maintain its edge by keeping the zinc cost of production between US$ 1,050-1,100 per metric tonne in FY25. Furthermore, the projected capital expenditure for the year is estimated to be in the range of US$ 270-325 million.

Hindustan Zinc's stock witnessed a decline of more than 2% on the National Stock Exchange (NSE), trading at Rs 396.55 per share as of 3:15 pm. Despite the recent downturn, the stock has provided investors with returns of 25% over the past year.