>HINDUSTAN ZINC LIMITED (ICICI DIRECT)

Got the zing…

Hindustan Zinc (HZL) is India’s largest and the world’s second largest integrated producer of zinc and lead with total metal production capacity of ~7.54 lakh tonne per annum (TPA). With its world class mining and smelting assets ensuring low cost of operations, strong volume CAGR of
~13% in FY09-12E through expansion and robust balance sheet with cash/share of ~Rs 240 (June’09), the company is set to ride the bumps in the commodity cycle with ease. We expect HZL to register a CAGR of 16.1% and 17.8% in net sales and net profit, respectively, from FY09-12E. We are initiating coverage on the stock with an OUTPERFORMER rating.

■ Capacity expansion of integrated operations continues
HZL has increased its zinc capacity threefold since 2002. The company is currently implementing a 3.1 lakh TPA capacity expansion plan, which would catapult it to the No. 1 spot among integrated zinc-lead producers in the world. The expansion would help the company to register a sales volume CAGR of ~13% in FY09-12E, reaching zinc sales of ~7.5 lakh tonne in FY12E.

■ Ever increasing reserves and resources
Through aggressive exploration and drilling activities, the reserves and resources of its world class captive mining assets are continuously increasing. HZL currently holds ~31 million tonne (MT) of contained zinc-lead metal in its mines. This translates into remaining operational life of more than 30 years at an expanded capacity of ~1 MT.

■ Immune to down cycles on low cost of production
HZL boasts of one of the lowest cost operations in the world. With current cost of production at ~US$700/tonne, it remains largely immune to commodity down cycles.

■ Valuations leave room for upside
At the current market price of Rs 736.7, the stock is trading at 4.5xFY11E EV/EBITDA and 8.9x FY11E EPS of Rs 82.9. We expect an upward re-rating of the stock, going forward and value the stock at 6.5xFY11E EV/EBITDA. We are assigning a target price of Rs 910 to the stock and initiating coverage on HZL with an OUTPERFORMER rating.

To see full report: HINDUSTAN ZINC LIMITED

>INVESTOR'S EYE (SHAREKHAN)

INDEX

■ Stock Update >> Hindustan Unilever
■ Stock Update >> United Phosphorus

To see full report: INVESTOR'S EYE 070909

>EAGLE EYE ON 09/09/09 (SHAREKHAN)

Support at 4740

Markets on Sep 08, 2009: Above 4800

The market continued to move up third day on trot and closed marginally higher on support from heavyweights like Reliance Industries (up 3.5%) and the State Bank of India (up 4%). After hitting the day’s high in the first half, Nifty faced resistance around 4850 and slipped in the second half. In the coming sessions, Nifty is expected to take support around 20 hourly moving average (HMA) at 4740 and continue the up-trend for the short-term target of 5000. The bullish island on the daily chart holds the key for the current up-trend, however a close below 15275 will lead to trend reversal. Nifty is currently trading above 20 daily moving average (DMA) and 40DMA at 4626 and 4539 respectively, which are crucial support levels going forward. The momentum indicator (KST) has turned up and has given positive crossover. Our short-term bias is up for the target of 5000 with reversal above 4575.

On the hourly chart, Nifty is trading above 20HMA and 40HMA at 4743 and 4704 respectively, which are crucial supports in the immediate run. The momentum indicator (KST) has given negative crossover and trading above the zero line. The market breadth was negative with 532 advances and 741 declines on the NSE and 1384 advances and 1503 declines on the BSE.

Nifty added 22 points and Sensex 107 points to its kitty today. Of the 30 stocks of the Sensex, aluminium major Hindalco Industries (up 6%) and biggest Indian bank the State Bank of India (up 4%) were the top gainers, however Tata Power (down 3.5%) and FMCG major Hindustan
Unilever (down 2.5%) were hit the most. Metal stocks saw good buying, while auto stocks were under pressure.

To see full report: EAGLE EYE 090909

>BHEL (FIRST CALL)

SYNOPSIS

• BHEL is one of the largest engineering and manufacturing enterprises in India ranked among the leading Power Plant Manufacturers in the world.

• Its current order book stands at Rs1, 240 billion, which represents 4.6x of FY09 revenue and provides strong revenue visibility for the near-to-medium term.

• Its initiative in nuclear power and super critical segment as key positives for future growth.

• The company has already increased its capacity to 10GW and is looking to increase it further to 15GW by the end of this calendar year.

• Increased order inflows from private sector are a key positive for the company.

• Net sales and PAT of the company are expected to grow at a CAGR of 27.30% and 17.34% over FY08 to FY11E.

To see full report: BHEL