Hindustan zinc

- HZL has unveiled a massive 2-phase capex roadmap to nearly double its zinc, lead & silver capacity by FY31. - But will the market reward this bold ambition or punish near-term dilution? Let’s decode ⤵ ⿡ The ₹3.2 - 3.5 Lakh Cr Capex Plan Phase 1: ₹12,000 Cr approved ▪Adds 250ktpa zinc capacity at Debari ▪ Silver refining +30t to 830tpa ▪ Total: 1.38mtpa refined metal & 1.51mt mined metal ▪ Completion by H1FY29 Phase 2: Yet to be approved ₹20,000-₹23,000 Cr ▪ Zinc capacity to rise to 1.6mtpa ▪ Lead: 210ktpa → 400ktpa ▪ Silver: 800t → 1,500tpa ▪ Capex: ₹200-230 Bn by FY31 ⿢ Why This Matters ▪HZL delivered just ~1.5% CAGR in metal volumes (FY16–25). ▪It’s running near peak capacity today. ➡ This capex brings long-term growth visibility. But… not before FY29. ⿣ Cost-Efficient Execution, But Payback >5Y ▪Total Capex: ~$2,900/t (global avg: $3,500/t) ▪Full ramp-up RoE: ~18% ▪But current RoE: 72% (FY25), so return dilution is imminent ▪Payback only after FY31 despite heavy upfront outflows ➡ Growth is coming… but earnings dilution is nearer. ⿤ Capex Phasing: Internal First, Debt Later ▪FY26E: ₹2,595 Cr ▪FY27E: ₹5,000 Cr ▪FY28E: ₹3,500 Cr ▪FY29E: ₹905 Cr ▪Total Phase 1: ₹12,000 Cr ➡ Mgmt will decide debt mix after reviewing dividend plans (Only Phase 1 included; Phase 2 funding plan awaited) ⿥ Key Financials (FY24 → FY27E) Revenue: FY24: ₹28,934 Cr → FY25: ₹33,969 Cr → FY26E: ₹36,055 Cr → FY27E: ₹37,206 Cr EBITDA: FY24: ₹13,661 Cr → FY25: ₹17,296 Cr → FY26E: ₹19,397 Cr → FY27E: ₹20,389 Cr Net Profit: FY24: ₹7,787 Cr → FY25: ₹10,279 Cr → FY26E: ₹11,747 Cr → FY27E: ₹12,298 Cr Return on Equity (RoE): FY24: 55.3% → FY25: 72.1% → FY26E: 78.6% → FY27E: 66.4% Dividend per Share (DPS): FY24: ₹13 → FY25: ₹29 → FY26E: ₹20 → FY27E: ₹20 ➡ Payout likely to reduce as capex ramps up $HINDZINC