Hindustan Zinc Q2 profit rises 35% on better prices, use of renewable energy

Mumbai: Hindustan Zinc Ltd’s profit for the July-September quarter grew by a third compared to a year earlier as the company’s products fetched better prices and its electricity bill went down with the use of renewable energy.

The Vedanta Group company on Friday said it will be investing ₹327 crore for a minimum 26% stake in co-group firm Serentica Renewables. The company’s energy consumption included 14% renewable power during the quarter, compared to negligible levels a year ago, helping it pare its power costs.

The largest producer of zinc, lead and silver in India reported a consolidated profit of ₹2,327 crore for the quarter ended September, 35% higher year-on-year. Consolidated revenue grew 22% to ₹8,252 crore on the back of higher zinc prices and increased metal production.

“Hindustan Zinc has continued to gather momentum from its previous quarter to record historic highs in its second quarter mined and refined metal production,” said Arun Misra, the company’s chief executive.

“Leveraging strong precious metal prices, we have focused on maximizing our silver production through pyro operations on lead mode, resulting in a 10% sequential increment in silver volumes,” he said.

Average zinc and silver prices during the quarter were about 14% and 25% higher year-on-year. This was partially offset by lower lead prices, which declined 6%.

Capacity expansion

The former public sector firm produced 256,000 tonnes of metal during the quarter, which was 2% more than last year and the most it has produced in a single quarter.

The firm is planning to nearly double its annual production to 2 million tonnes and is presently conducting feasibility studies with consultants. The expansion of mining and manufacturing assets could cost about $2.5 billion, according to Misra.

Hindustan Zinc will be increasing the use of renewable energy to 70% of its total requirement by 2026-27, its chief financial officer Sandeep Modi said, adding that this could bring down production cost by up to $50 per tonne. That translates to about 5% of the current production cost.

Renewable energy typically costs ₹2.5-3 per unit compared to ₹6.5 that Hindustan Zinc pays for grid power. The company’s also produces captive power from burning coal.

During the quarter, the company’s zinc cost of production was $1,071 per tonne before royalties, which was 6% lower year-on-year. It has given a guidance of $1,050 per tonne for FY25 and plans to bring it down further to $1,000 in subsequent years, Modi said.

Zinc and silver lead the way

In the September quarter, Hindustan Zinc increased its operating margin to 40% from 34% in the same period last year. Net profit margin rose to 29% from 26% a year ago.

The company's zinc/lead division generated a revenue of ₹6,403 crore in the second quarter, an increase from ₹5,259 crore a year earlier. Its silver segment reported a revenue of ₹1,550 crore, up from ₹1,297 crore in the previous year's second quarter.

“During the quarter, Hindustan Zinc recorded a six-quarter highest EBITDA and PAT before exceptional items with a strong operational performance, supported by favourable market conditions,” Modi said. 

The company also registered an "eight-quarter highest EBITDA margin during the quarter, which clocked over 50% with a 450 (basis point) y-o-y improvement,” he added.

Hindustan Zinc share price today

The Hindustan Zinc stock opened on Friday at ₹506.90 per share on BSE, and closed at ₹507.50 apiece.

“Hindustan Zinc share price have been moving within a narrow range over the past few weeks, with 490 serving as support and 530 as resistance,” said Rajesh Bhosale, equity technical and derivative analyst at Angel One. “Currently, there is no clear trend, and the next directional move will become evident only after a breakout from this range.”

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