Those looking at long-term investment, the Hindustan Zinc stock may not be a bad bet to buy at the current levels. Here are 5 reasons to be buying the stock.
1) Expansion plans
Hindustan Zinc is a mining and metal producer of zinc, lead and silver. All of these metals have a solid robust domestic demand and global demand, with demand out stripping supply.
The company is planning to increase its mining capacity from 1.2 million tonnes to 1.5 million tonnes per annum. The phase 1 of the project is likely to be completed in the next three years, which should boost capacity and hence revenues in the years to come.
2) Huge reserves
Hindustan Zinc has huge reserves, which is extremely important for a mining company. The total reserves as on March 31, 2018 was a staggering 411.3 metric tonnes containing 35.7 metric tonnes of zinc-lead metal and 1 billion ounce of silver. It is estimated that the overall mine life would be more than 25 years.
3) Stock near 52-week lows
The Hindustan Zinc stock, has fallen over the last few weeks and is now available at Rs 276, against its 52-week high of Rs 339. Also, the 52-week low price is Rs 266, which means the shares are not too far from the 52-week low price.
4) Huge cash reserves
The company is a cash rich company, with nearly Rs 21,000 crores cash parked in high quality debt instruments. Apart from this, the dividend yield on the stock is also very decent.
5) Cheap valuations
The valuations of Hindustan Zinc is not very expensive. Our EPS estimates suggest that we can look at an estimate of Rs 22 for 2018-19. If we apply a p/e of 15 times, the stock should quote at Rs 330 at the very least.
Zinc and lead prices are expected to consistently remain higher in the coming months, and a sharp drop in the prices is unlikely. This should give a boost to the pricing power for Hindustan Zinc. Buy the shares with a long term perspective in mind for good gains.