Hindustan Zinc
Reco Price: Rs 152,
Target Price: Rs 155
Hindustan Zinc’s (HZL) topline of Rs 3,230 crore was 23.1 per cent higher on a q-o-q basis and above IIFL expectations. The outperformance was due to higher silver content in lead concentrate sales. The company achieved its highest ever mined metal output at 231,039 tonnes, four per cent higher on a q-o-q basis. The jump in mined output was due to higher contribution from the stream IV concentrator at Rampura Agucha. Operating margin for the quarter expanded 350 basis points q-o-q due to higher product realisations and concentrate sales. Input costs (coke and coal) per tonne increased on a q-o-q basis. Net zinc metal cost without royalty, during the quarter was $784/tonne, a decrease of one per cent qoq. Net profit of Rs1770 crore was higher than estimates due to lower tax rate and higher than expected other income. Other income during the quarter jumped 46.1 per cent qoq to Rs 300 crore. IIFL has lowered its volume growth estimate for FY12 on account of the delay in the commissioning of the 0.1mtpa lead smelter. It expects HZL to witness earnings CAGR of 16.1 per cent over FY10-13E. Maintain Market Performer.
—IIFL
MindTree
Reco price: Rs 391
Target price: Rs 400
Mindtree reported in-line revenue growth of 1.7 per cent q-o-q to Rs 391 crore due to volume growth of two per cent q-o-q. Ebitda margin at 11.2 per cent was lower than expectation. High forex gain led to EPS of Rs7.8 (five per cent q-o-q growth). In dollar terms, IT services grew 5.4 per cent, PE Services grew 1.7 per cent and NIW declined 57 per cent due to loss of revenue. Overall pricing declined 0.3 per cent. Overall Ebitda margin declined 40 basis points to 11.2 per cent, despite rupee depreciation and absence of product business’ restructuring cost of $3.2 million in Q3FY11. Europe grew 14.2 per cent whereas US grew just 0.5 per cent, a similar performance compared to Q3FY11. Rest of world declined 22 per cent due to Kyocera revenue loss of $2.5 million. Manufacturing led the performance with 7.2 per cent growth. The attrition rate continues to be high at 25.1 per cent (90bps increase). Utilisation rate (incl. trainees) increased 160bps to 70.9 per cent. The loss of revenue from Kyocera will pull down the business volumes for 2011-12. The revenue growth in IT services is likely to be good but margin pose concern. Maintain Hold.
—Pinc Research
