HINDZINC - Hindustan Zinc Ltd. Share Price

Management expressed an optimistic outlook for Hindustan Zinc Limited, highlighting a record-breaking year with the highest-ever production of both mined and refined metal. They reported an EBITDA of INR 17,465 crores, a 28% increase, and a profit after tax of INR 10,353 crores, up 33% year-on-year, reflecting strong operational performance.

Key forward-looking points include:

1. Production Guidance: Projected mined metal production for FY '26 is 1,125,000 tons (plus or minus 10,000 tons), and refined metal production is expected to be 1.1 million tons (plus or minus 10,000 tons). Silver production guidance is forecasted between 700 to 710 tons.

2. Cost of Production: Zinc production costs are expected to range between $1,025 to $1,050 per ton. This estimation considers cost reductions from increased renewable energy usage, anticipated to rise from 13% to 30% of total energy consumption.

3. Capex Plans: The approved growth capex projects are estimated between $225 million to $250 million, with future guidance subject to board approvals.

4. Market Insights: Management noted favorable market conditions, predicting the continued resilience of zinc prices due to persistent supply deficits and India's infrastructural growth driving demand.

5. Innovative Projects: Future initiatives include commissioning a technology that recovers lead and silver from smelter waste, which is expected to produce an additional 27 tons of silver and 6,000 tons of lead per year upon successful implementation.

6. Sustainability Goals: The company aims to enhance its sustainability profile, evidenced by introducing Asia's first low-carbon Zinc EcoZen and improving its GHG emissions target by reducing carbon emissions by 0.67 million tons, exceeding their target of 0.5 million tons.

Overall, with strong fundamentals and a focus on operational excellence and sustainability, management is confident in sustaining growth and shareholder value amidst evolving market dynamics.

1. Question: "The first one is actually on the guidance, particularly for cost of production and silver. So, if I look at the cost of production guidance for FY '26, that is higher by $50 per ton compared to Q4. What are the reasons for the same?"

Answer: We expect the cost of production to increase primarily due to a normalization of metal grades, having seen a higher grade in Q4. Additionally, with the transition to greater renewable energy usage, we're anticipating a cost reduction of $10-$12 per ton, allowing us to manage our costs effectively while increasing production.

2. Question: "Now silver volume, if I compare it with FY '24, the guidance for FY '26 is lower than the actual volume for FY '24. Will we be focusing more on zinc this year instead of lead and silver?"

Answer: Yes, we will focus on zinc production this year more than silver. The silver guidance for FY '26 is based on operating primarily in zinc and lead mode, which implies less silver output compared to the lead mode we operated under previously, impacting our silver production estimates.

3. Question: "Can you throw some more light on the innovative technology for the recovery of lead and silver from smelting waste at Dariba?"

Answer: This new technology simplifies the recovery of lead and silver, producing a cake from jarosite without burning it. It offers a more direct and environmentally friendly method than traditional fuming processes. Upon successful implementation in Dariba, we plan to extend it throughout our company, enhancing our sustainability practices.

4. Question: "What percentage of renewable energy are we using now and what is the target for FY '26?"

Answer: In Q4, approximately 15% of our power came from renewable sources. For FY '26, we aim to increase that to 30%. This transition will aid our cost reduction efforts and bolster our commitment to sustainability.

5. Question: "Can you provide the generated EBITDA for the zinc alloy plant and its potential at full capacity?"

Answer: For the full year, our zinc alloy plant generated an EBITDA of INR 100 crores with a production of 10,000 tons. When we operate at full capacity next year, anticipated EBITDA should be between INR 250 to 275 crores.

6. Question: "What hedging gains were booked during FY '25, and do we have any outstanding hedges now?"

Answer: We recorded strategic hedging gains of INR 150 crores throughout FY '25, and currently, there are no outstanding strategic hedging positions, allowing us to remain agile in the market.

7. Question: "Given the current commodity pricing volatility, would we consider hedging again?"

Answer: We remain open to opportunistic hedging as dictated by market conditions. With strong EBITDA margins, we can afford to hedge 15-20% of our production, adapting to the dynamic environment without overcommitting.

8. Question: "When should we expect production from the Bamnia Kalan mine?"

Answer: The Bamnia Kalan mine is currently in the development phase and will take about 24 months to reach first production. We are diligently working on portal formation and anticipate an operation start in two years' time.

9. Question: "How do you see the zinc market outlook given the recent surplus predictions by the international zinc study group?"

Answer: We stand by our forecast of a zinc deficit, based on India's ambitious steel production goals. With massive infrastructure plans underway, we believe demand for zinc will remain robust, overshadowing the global surplus forecasts.

10. Question: "Is there a timeline for our planned expansion from 1.2 million tons to 1.5 million tons of production?"

Answer: We aim to announce the first phase of expansion for 1.5 million tons within the next month, with implementation timelines extending over the following 24 months. Our transition to this incremental capacity will focus on maximizing our existing resources.

This summary condenses key insights and answers from the earnings call transcript into clear, digestible points.