Hindustan Zinc (500188) Investor Update summary

Strategic growth and expansion plans

• Announced a 2X Growth Project to double refined metal capacity to 2 million tons per annum by 2030, with the first phase expanding by 250,000 tons per annum at Debari and a total investment of INR 12,000 crore.

• Expansion includes a new smelter, leaching and purification plant, cell house, and additional roaster, raising total metal capacity to 1.379 million tons and mining capacity to 1.5 million tons per annum.

• The project will be executed in phases, with the first phase taking 36 months and subsequent phases to be announced within 30-45 days, targeting full ramp-up by FY 2031.

• All mines will be expanded, with initial focus on high-grade Rampura Agucha, followed by other mines and lead capacity in later phases.

• Silver capacity will increase from 800 to 1,500 tons per annum in phases, with the first phase adding 25-30 tons and larger increases tied to future lead expansions.

Financial outlook and capital allocation

• Projected revenue and EBITDA at full 2X capacity are INR 62,000-65,000 crore and INR 42,000 crore, respectively, with annual free cash flow of INR 20,000-22,000 crore at peak.

• Capex for doubling capacity is estimated at INR 32,000-35,000 crore over five years, funded through a mix of debt and equity to optimize equity IRR.

• The first phase's capex split is INR 6,200 crore for the smelter (including fumer) and INR 5,800 crore for mining, with annual capex peaking in FY 2028-2030.

• Project IRR is expected to be higher than borrowing rates, with a payback period of 4-5 years post-construction for the 250 KTPA project.

• Dividend policy will be maintained, subject to board approval, as strong cash flows and disciplined capital allocation are expected.

Market positioning and demand outlook

• Maintains 75%-80% domestic zinc market share, with expansion aligned to India's projected steel capacity growth to 300 million tons by 2030.

• Confident in domestic demand growth due to India's infrastructure push, low per capita steel consumption, and government targets.

• Cost leadership ensures competitiveness in both domestic and export markets, with production costs targeted around $1,000 per ton.

• Conservative price assumptions used for planning: zinc at $2,650/ton, lead at $1,950/ton, and silver at $34/oz.

• Market share is expected to remain stable as the market grows, with the company prepared to export if needed.