HINDZINC - Hindustan Zinc Ltd. Share Price

In the earnings call for the fourth quarter and full year FY '26, Hindustan Zinc Limited's management provided a positive outlook emphasizing robust operational and financial performance. They reported a record-breaking mine metal production of 1.1 million tons and achieved an all-time high net profit of INR 13,832 crores for the fiscal year.

For FY '27, management expects mined metal production to reach approximately 1,150 KTPA (plus or minus 10 KT) and refined metal production to be around 1,100 KTPA (plus or minus 10 KT). Silver production guidance is set at about 680 tons (plus or minus 10 tons). The management reiterated a commitment to cost leadership, expecting zinc production costs to be between $975 and $1,000 per ton.

Key forward-looking points highlighted by management include:

1. Sustained financial performance: Revenue for FY '26 surpassed INR 40,000 crores, and EBITDA rose to INR 22,162 crores, with a margin of 57%.
2. Planned capital expenditure for FY '27 is estimated between $500 million and $600 million for growth projects, including a 250,000 tons per annum integrated zinc smelter and tailings reprocessing plants.
3. A focus on sustainability, targeting 30-35% renewable energy consumption for FY '27, aiming for 70% by FY '28.
4. Strategic initiatives in mineral exploration, securing the potential for potash, tungsten, and rare earths.
5. An emphasis on safety and a commitment to improving operational efficiencies, including a risk management approach to prevent incidents like the one at Zawar mines.

Overall, management's outlook projects confidence in maintaining growth and profitability while navigating market challenges.

Major Q&A from Earnings Call

Question: Would it be possible for you to give me what the hedge quantity across zinc and silver would be for both Q1FY27 and the whole year of FY27?
Answer: For Q1, we have hedged zinc at 20 KT with an average price of $3,100 between April and June, and silver is hedged at 25 tons at $57. For the full year FY27, we have 71 KT hedged at an average price of $3,225 per ton and silver hedged at 59 tons at an average price of $60 per troy ounce.

Question: Could you give us some brief about the silver production run rate from here onwards?
Answer: Our guidance is set for silver production at 680 tons for this year. With ongoing expansions and commissioning of new facilities, we are on track to cross 800 tons by the end of the expansion period. Our current run rate from Q4 is promising enough for this forecast.

Question: There's a 35.0% sequential jump in other expenses. What were the key reasons behind the same?
Answer: The increase arises from agreements involving smelter residues we sell to third parties for processing. Under this arrangement, we accounted for around INR600 crores on both the income and expense sides, raising other operating income and expenditures concurrently.

Question: Can you provide guidance regarding the anticipated cost of production (COP) for Q1 and the impact of geopolitical conditions?
Answer: Q1 is expected to see a COP around $975 to $1,000 per ton, factoring historical mining grades and geopolitical impacts. Increased costs for diesel, propane gas, and other inputs could influence these figures, but we aim to stay below $975 in a stable environment.

Question: How will renewable energy consumption rise in FY27?
Answer: We closed FY26 at 18% renewable energy usage. For FY27, we expect this to increase to between 30% and 35%, with a longer-term goal of reaching 70% by FY28.

Question: What is the status of our expansion plans, specifically the next phase after the initial 250 KT smelter?
Answer: We're advancing plans for a 1 million ton smelter, centralizing our operations. Final designs are being confirmed, and we anticipate placing orders soon, with measures to enhance efficiency and cost.

Question: Can you clarify the dividend payout policy amidst ongoing investments?
Answer: We'll maintain a balance between dividend payout and growth investments. Our policy of a minimum 30% payout ratio remains, and this enables us to reward shareholders while funding expansions robustly.

Question: What were the coal sourcing mix and its impact on production costs?
Answer: In FY26, we achieved about 53% domestic coal usage, with 30% sourced from imports. The focus remains on domestic sourcing due to cost advantages, as we expect limited increases in prices despite external pressures.