Hindustan Zinc (HINZIN) 245

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1 Result Update Rating matrix Rating : Hold Target : 250 Target Period : 12 months Potential Upside : 2% What s Changed? Target Changed from 200 to 250 EPS FY17E Changed from 17.2 to 20.2 EPS FY18E Changed from 18.5 to 22.7 Rating Unchanged Quarterly Performance Q2FY17 Q2FY16 YoY (%) Q1FY17 QoQ (%) Revenue 3, , , EBITDA 2, , , EBITDA (%) bps bps PAT 1, , , Key Financials Crore FY15 FY16 FY17E FY18E Total Op. Income EBITDA Net Profit EPS ( ) Valuation summary FY15 FY16 FY17E FY18E P/E Target P/E EV / EBITDA P/BV RoNW RoCE Stock data Particular Amount Market Capitalization ( crore) 103,512.5 Total Debt (FY16) ( crore) Cash and Investments (FY16) ( crore) 35,235.3 EV ( crore) 68, week H/L ( ) 262 /135 Equity capital ( crore) Face value ( ) 2 Price performance (%) Return % 1M 3M 6M 12M Hindustan Zinc Vedanta Hindalco Ind Research Analyst Dewang Sanghavi dewang.sanghavi@icicisecurities.com Akshay Kadam akshay.kadam@icicisecurities.com Zinc sales volume drives beat... October 21, 2016 Hindustan Zinc (HINZIN) 245 Hindustan Zinc (HZL) reported a healthy set of Q2FY17 numbers wherein topline, EBITDA and PAT came in higher than our estimates. The betterthanexpected performance was driven by higher volumes After adjusting for excise duty, net operating income for the quarter came in at crore (up 39.3% QoQ, higher than our estimate of crore). Zinc sales volumes were at ~ tonnes (up 23.3% QoQ, higher than our estimate of tonnes). Lead sales volumes came in at ~32000 tonnes (up 39.1% QoQ, higher than our estimate of 30063). Silver sales volumes came in at ~ kg (up 22.7% QoQ better than our estimate of kg) Zinc metal cost of production per tonne before royalty (CoP) during the quarter declined 12.0% QoQ to 54186/tonne (US$809/tonne) augmenting the EBITDA margin to 58.9% (44.7% in Q1FY17 and 54.4% in Q2FY16), higher than our estimate of 54.8%. Subsequently, reported EBITDA came in at crore (up 83.6% QoQ, higher than our estimate of crore) In accordance with INDAS, the company temporarily capitalised excess ore burden of crore as deferred mining expenses (H1FY17: 330 crore) to more closely relate costs to actual production volumes. The same is expected to reverse in H2FY17 as waste excavation will be lower. Ensuing PAT was at crore (up 83.4% QoQ higher than our estimate of crore Huge reserve base; provides strong earnings visibility HZL is the leading miner & manufacturer of zinc and lead in India. Zinc metal is primarily used in galvanising steel, which is further used in the automobile & consumer goods industry while lead is primarily used in manufacturing automobile batteries. The company has a huge reserve base, which provides strong earnings visibility. In FY16, there was a gross addition of 25.3 MT to reserves and resources (R&R), prior to a depletion of 10.5 MT. Total R&R as of March 31, 2016 was MT containing 36.1 MT of zinclead metal. The overall mine life continues to be 25+ years. Low cost advantage aids in sustaining superior operating margins HZL s smelting assets are in the lowest quartile on the global cost curve. The low cost advantage can be attributed to its fully integrated nature of operations involving mines, smelter and captive power plants. Furthermore, HZL s smelters are logistically well placed in Rajasthan, near its mines, which results in low transportation and shifting costs. Revise upward zinc, lead LME estimates, maintain HOLD HZL s Q2FY17 performance was largely driven by betterthanexpected zinc sales volume as well as notable upside witnessed in prices (Q2FY17 average quarterly zinc prices were up 17.4% QoQ to US$2252/tonne). On the back of the recent strength in zinc prices, we have upward revised LME zinc estimates to US$2250/tonne for FY17E (from US$2000/tonne earlier) and to US$2400/tonne for FY18E (from US$2100/tonne earlier). We value the stock at 7.0x (from earlier 6x on the back of healthy earning visibility) FY18E EV/EBITDA and arrive at a target price of 250. We have maintained HOLD rating on the stock. ICICI Securities Ltd Retail Equity Research

2 Variance analysis Q2FY17 Q2FY17E Q2FY16 YoY (%) Q1FY17 QoQ (%) Comments Total Operating Income 3, , , , Topline came in higher than our estimate Other Income Other income was above our estimates on account of higher mark to market gains Mining & Mfg Expenses , , Employee Expenses Administrative Expenses Mining Royalty Deferred mining expense (140.9) NA (189.0) 25.5 EBITDA 2, , , , EBITDA came in higher than our estimate EBITDA Margin (%) bps bps EBITDA margin came in higher than our estimate Depreciation Depreciation came in higher on account of a change in depreciation method on plant & machinery from April 1, 2016 Interest , Exceptional item NA PBT 2, , , , Tax Outgo PAT 1, , , , PAT came in higher than our estimate Key Metrics Zinc sales (tonne) 148, , Zinc sales volume came in higher than our estimate Lead sales (tonne) 32,000 30, Lead sales volume came in higher than our estimate Silver sales (kg) 108, , Silver sales came in higher than our estimate Change in estimates FY17E FY18E ( Crore) Old New % Change Old New % Change Comments Total Op. Income 15,560 16, ,868 18, All parameters broadly revised upwards EBITDA 7,821 8, ,550 10, EBITDA Margin (%) bps bps PAT 7,253 8, ,818 9, EPS ( ) LME Zinc (US$/tonne) 2,000 2, ,100 2, LME Lead (US$/tonne) 1,800 1, ,850 2, Currency US ($) Assumptions Current Earlier FY16 FY17E FY18E FY17E FY18E Comments Zinc sales (tonne) 759, , , , ,368 Broadly maintained estimates for FY17E and FY18E Lead sales (tonne) 145, , , , ,313 Broadly maintained estimates for FY17E and FY18E Silver sales (kg) 425, , , , ,938 Broadly maintained estimates for FY17E and FY18E LME Zinc (US$/tonne) 1, ,000 2,100 Zinc realisations revised upwards for FY17E and FY18E LME Lead (US$/tonne) 1, ,800 1,850 Lead realisations revised upwards for FY17E and FY18E USD: INR ICICI Securities Ltd Retail Equity Research Page 2

3 Company Analysis Hindustan Zinc is a leading manufacturer of zinc in India with an installed capacity of 823,000 tonne. On the lead front, the company is the only lead metal manufacturer domestically with an installed capacity of 185,000 tonne. Post meeting domestic metal demand, the company exports its metal produce. On the silver front, the company has an installed capacity of 5,00,000 kg. Exhibit 1: Zinc, lead (mined metal) production The total mined metal production at Hindustan Zinc has grown at a CAGR of 2.8% in FY1016 tonne 1,000, , , , , , , , , , ,000 FY11 FY12 FY13 FY14 FY15 FY16, *Production numbers Exhibit 2: Zinc sales & realisations trend We expect zinc sales volumes to grow at a CAGR of 2.7% during FY1618E 1,000, , , , , , , , , ,000 tonne 600, , , , , , , , ,000 50,000 /tonne 200,000 FY13 FY14 FY15 FY16 FY17E FY18E Zinc Sales Zinc Realizations, Exhibit 3: Lead sales & realisations trend We expect lead sales volumes to grow at a CAGR of 1.8% during FY1618E tonne 100,000 50, , , , , , , , , , , , , , ,000 50,000 FY13 FY14 FY15 FY16 FY17E FY18E Lead Sales Lead Realizations ICICI Securities Ltd Retail Equity Research Page 3

4 We expect silver sales volumes to grow at a CAGR of 2.9% during FY1618E Exhibit 4: Silver sales & realisations trend Kg 500, , , , ,000 55,813 32,597 43,200 43,200 60,000 42,638 41,608 50,000 40, , , , , , ,938 FY13 FY14 FY15 FY16 FY17E FY18E 30,000 20,000 10,000 /kg Metal pricing trend Exhibit 5: LME zinc prices (LHS) & inventory levels (RHS) 2, ,400,000 2, ,200,000 (In US$/tonne) 2, , , , , ,000.0 Mar11 May11 Aug11 Nov11 Jan12 Apr12 Jul12 Sep12 Dec12 Mar13 May13 Aug13 Nov13 Jan14 Apr14 Jul14 Sep14 Dec14 Mar15 May15 Aug15 Oct15 Jan16 Apr16 Jul16 Sep16 1,000, , , ,000 (In tonne) 200,000 Inventory (RHS) Prices (LHS) Source: Bloomberg, ICICIdirect.com Research Exhibit 6 LME lead prices & inventory levels 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 Jan12 Mar12 May12 Jul12 Sep12 Nov12 Jan13 Mar13 May13 Jul13 Sep13 Nov13 Jan14 Mar14 May14 Jul14 Sep14 Nov14 Jan15 Mar15 May15 Jul15 Sep15 Nov15 Jan16 Mar16 May16 Jul16 Sep16 Silver Sales Silver Realizations On a quarterly average basis, in Q2FY17, zinc prices were at US$2252.6/tonne, up 17.4% QoQ and 22.0% YoY. As on October 20, 2016, zinc prices were at $2271/tonne On a quarterly average basis, in Q2FY17, lead prices were up ~9.0% YoY and QoQ at US$1873.2tonne. As on October 20, 2016, lead prices were at $2003/tonne (In US$/tonne) Inventory Price Source: Bloomberg, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 4

5 Key takeaways from conference call Zinc metal CoP per tonne before royalty during the quarter was 54186/tonne (US$809/tonne), down 12% QoQ, up 8% YoY in rupee terms. The sequential reduction in zinc CoP was primarily on account of higher volumes, while the YoY increase was due to lower average grades due to a change in mining mix, higher mine development and planned lower production. Cost reduction initiatives were partly offset by higher petroleum product prices and lower acid prices During the quarter, mined metal production was at 192 KT, up 51% QoQ as per mine plan. The increase was primarily driven by higher ore production from Rampura Agucha open cast mine after high waste excavation during the previous quarter in accordance with the wasteore sequence. Integrated metal production during the quarter for zinc, lead and silver was up 47%, 25% and 21%, respectively Production volumes in H2FY17 are expected to be significantly higher than H1FY17. During the quarter, production volume from underground mining improved significantly as output from Kayad mine doubled YoY, Sindesar Khurd mine increased ~40% while output from Rampura Agucha underground mine increased ~83% Given the mining plan, ~ tonne metal in concentrate production will come in H2FY17, indicating a healthy base for both Q3 and Q4FY17 The Rampura Agucha open cast mine is expected to run out by FY18E instead of FY20E wherein mining will be restricted to additional depth of 30 metre instead of 50 metre envisaged earlier Sindesar Khurd is expected to ramp up to 4.5 million tonne (MT) of mined ore by FY17E end. Zawar will ramp up to capacity by FY19E, compensating for the loss from Rampura Agucha opencast mines Debottlenecking of mills, smelters would augment capacity resulting in increased mined metal production. The company has spent ~ 200 crore on the same. The Sindesar Khurd mill has been debottlenecked from 2.0 MT to 2.8 MT. The debottlenecking of the hydro smelter is expected to be complete by Q3FY17. A new mill coming up at Sindesar Khurd is expected to be operational by Q4FY17 HZL s management expects upside in zinc prices to continue in the near term. The treatment charges for zinc smelters have dropped below $100/tonne. Premiums have also reduced by $1520/tonne QoQ. The company expects premiums to increase to retain profit for smelters There is strong demand from galvanisers in Europe. On the domestic front, regulatory trade duties benefiting steel players augurs well for the company The power cost based on normal volumes is expected to remain at crore/quarter. The management expects zinc CoP before royalty for FY17E to remain stable relative to the previous year FY16 Other income is expected to come in the range of ~ crore per quarter. The tax rate is expected to remain lower in the range of higher teens to a little over 20% in the next two years (near MAT) Capex estimates for FY17 are at ~US$ million compared to US$250 million spent in FY16 HZL s board of directors has approved the dividend policy of 30% of PAT or 5% of net worth, whichever is higher ICICI Securities Ltd Retail Equity Research Page 5

6 Expansion projects The company achieved an underground mine development of metre during the quarter, up 12% YoY To mitigate the risk of any delays in ramp up of Rampura Agucha underground mine, Stage V was conceptualised in late 2014 to extend the life of the open cast mine to by deepening the pit by an additional 50 metre. However, concurrent mining is leading to geotechnical challenges in both open pit and underground. After deliberations with internal & global technical experts, they have decided to modify Stage V limiting the incremental pit depth to 30 metre. This will mitigate pit wall challenges and significantly reduce wasteore ratio, providing a fresh impetus to accelerating mine development at the underground mine in a safe manner. Ore production from Stage V commenced during the quarter and is now being accelerated to be complete by March 2018 The company would develop both Stage IV and Stage V in FY17, while will use only Stage V in the next year. In FY1920, the mine output will completely move to underground mining driven by shafts The expansion target of 1.2 million tonne (MT) mined metal production remains intact, as per plan Main shaft sinking at Rampura Agucha mine is progressing well and has reached a depth of 920 metre against final depth of 950 metre. Winder erection is at an advanced stage of completion and preequipping work of main shaft commenced during the quarter At the Sindesar Khurd mine, preparatory work for headgear erection of the main shaft commenced during the quarter while upramp development work is progressing well. The construction of new mill of 1.5 MTPA is on track. Commissioning is expected by the end of FY17, taking the milling capacity to 4.25 MTPA. At Zawar mill, debottlenecking along with associated power and infrastructure projects are advancing well and expected to be completed by end of FY17. Decline development at key mines of Zawar is progressing well ICICI Securities Ltd Retail Equity Research Page 6

7 Key takeaways from annual report HZL has continued its emphasis on long mine life and low cost assets driving profitability, which underlines the business model of responsible growth FY16 marked the golden jubilee year for the company. A special dividend of 24/share was declared on equity share of 2. The total outlay on account of the special dividend amounted to ~ crore including dividend distribution tax (DDT). The company had previously declared an interim dividend of 3.8 per share in October 2015, an outlay amounting to 1932 crore (including DDT) With the commodity market witnessing a downturn in FY16, the company adopted a resilient strategy wherein the focus was to increase production, control costs, maintain domestic market share and increase presence in regions of emerging markets The company continued exploration of field to increase its reserve and resource (R&R) base. During the year, it added 25.3 MT augmenting R&R to MT, supporting an overall mine life of 25+ years. Mine development during the year has been on track with pit deepening work at Rampura Agucha open cast mine set to increase the depth of the pit to 420 m. Stage V commenced during the year and is progressing well effectively mitigating the delay in rampup of the underground mine where full production is expected by 2019 During FY16, the zinc mined metal production witnessed a drop of 4% YoY. This was primarily on account of a fall of in mined ore from Rampura Agucha open cast mine to the tune of 14% YoY (as per production plan) with a corresponding 1% fall in the zinc grade (from 13% to 12%) as well The company s transition to underground mining has been satisfactory contributing ~40% mined metal production in FY16 (up from that of 28% YoY). The share of underground mining in production is further expected to increase to ~60% in FY17 A key achievement during the year has been ore production to the tune of 3 MT from the Sindesar Khurd Mine, registering growth of 55% YoY. In FY17, mined metal is expected to be marginally higher than FY16. Quarterly variations in production are expected to continue due to waste and ore sequence at Rampura Agucha mine, partly offset by ramp up of underground mines. The integrated lead and silver metal production in FY17 will be higher from FY16 while integrated zinc metal production will be at similar levels of FY16 The management expects domestic zinc demand to grow at a steady pace of 67% in the near term, reaching 900 KT in The company is actively working with industry associations such as International Zinc Association (IZA) on developing new applications for zinc in the country, particularly galvanised rebar, galvanised auto car body, zinc in fertiliser, etc, which will further boost demand. On the lead front, demand is expected to be driven by increasing use of lead batteries aligned with the growth in vehicles, ebikes, telecom tower and solar segment. The management expects the lead market to move in deficit in the next two years owing to undersupply ICICI Securities Ltd Retail Equity Research Page 7

8 Outlook and valuation HZL s Q2FY17 performance was largely driven by betterthanexpected zinc sales volume as well as notable upside witnessed in prices (Q2FY17 average quarterly zinc prices were up 17.4% QoQ to US$2252/tonne). On the back of the recent strength witnessed in zinc prices, we have upward revised LME zinc estimates to US$2250/tonne for FY17E (from US$2000/tonne earlier) and to US$2400/tonne for FY18E (from US$2100/tonne earlier). We expect HZL s H2FY17 to be substantially better than H1FY17 on expectation of healthy pickup in volumes, providing a strong earning visibility. Going forward, during FY1618E, HZL is expected to clock a CAGR of ~15% in topline and ~24% growth in EBIDTA. We value the stock at 7.0x (from earlier 6x on the back of healthy earning visibility) FY18E EV/EBITDA and arrive at a target price of 250. We have maintained HOLD rating on the stock. Exhibit 7 : Target price calculation Particulars Amount FY18E EBITDA ( Crore) EV/EBITDA Multiple 7.0 EV ( Crore) Debt ( crore) Cash & Cash Equivalents ( crore) Implied Equity Value ( crore) No of Shares (crore) Target Price ( /share) 250 Exhibit 8 : Valuation matrix Total Op Income Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) (Rs) (%) (x) (x) (%) (%) FY FY FY17E FY18E ICICI Securities Ltd Retail Equity Research Page 8

9 Recommendation History vs. Consensus ( ) Jul14 Sep14 Dec14 Feb15 May15 Jul15 Oct15 Dec15 Feb16 May Jul16 (%) Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Mar09 Aug09 Mar10 Mar10 May10 Mar11 Mar11 Dec11 Mar12 Mar13 Oct13 Jan16 Jan16 Mar16 Price Idirect target Consensus Target Mean % Consensus with BUY Event Rampura Agucha mine expanded from 3.75 million tonne per annum (MTPA) to 5 MTPA making the total mining capacity of the company to 7.4 MTPA Government of India increases royalty rates on metals, which includes zinc & lead produced by the company Rampura Agucha Mine expansion from 5 MTPA to 6 MTPA, increasing the total mining capacity of the company to 8.4 MTPA Commissioned the 210,000 tonne per annum hydrometallurgical zinc smelter at Rajpura Dariba, increasing the zinc & lead metal production capacity to 964,000 tonne per annum (879,000 tonne of zinc and 85,000 tonne of lead) Reports increase in resource & reserves by 33.7 million tonne (MT) to MT Splits shares in the ratio of 1:5 i.e. the face value gets reduced from 10 to 2 per share Commissioned 1.5 MTPA concentrator at silverrich Sindesar Khurd Mine; commissioned 160 MW (80X2) captive power plant at Dariba Mines & Mineral (Development & Regulation) Bill introduced in Parliament. Proposes payment of amount equivalent to royalty for development of the areas in which the miners operate. Export duty increased to 30% iron ore exports from India Commissions the 100 KTPA lead smelter at Dariba, increasing the lead production capacity to 185 KTPA; rampedup Sindesar Khurd mine to 2.0 MTPA capacity; commissioned new silver refinery, increasing the silver refining capacity to 500 TPA Announces next phase of growth plan to increase capacity to 1.2 million tonne per annum The promoter group revises its offer for buying residual stake in the company from the Government of India Aims to enhance ore and metal production to 14 million tonne per annum (MTPA) and 1.10 MTPA respectively; announces investment of 8000 crore in the next three to five years Supreme Court stays proposed 29.54% stake sale by Government of India to Vedanta Resources Declares special golden jubilee dividend of 24 per equity share of 2 each for FY16, a payout amounting to crore Top 10 Shareholders Rank Investor Name Latest Filing Dat% O/S Position (M) Change (M) 1 Vedanta Resources PLC 30Sep Government of India 30Sep Janus Capital Management LLC 30Jun Pictet Asset Management Ltd. 31May UTI Asset Management Co. Ltd. 31Aug The Vanguard Group, Inc. 31Aug ICICI Prudential Asset Management Co. Ltd. 31Aug Birla Sun Life Asset Management Company Ltd. 30Sep L&T Investment Management Limited 31Aug Invesco PowerShares Capital Management LLC 30Sep Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Sep14 Dec14 Mar15 Jun15 Sep15 Promoter FII DII Others Recent Activity Buys Sells Investor Name Value Shares Investor Name Value Shares Janus Capital Management LLC 6.56m 2.45m ICICI Prudential Asset Management Co. Ltd m 4.48m Calamos Advisors LLC 3.70m 1.21m Axis Asset Management Company Limited 1.63m 0.61m Goldman Sachs Asset Management International 3.39m 1.11m Pictet Asset Management Ltd. 0.61m 0.24m Goldman Sachs Asset Management (US) 1.70m 0.56m UTI Asset Management Co. Ltd. 0.53m 0.16m Schroder Investment Management Ltd. (SIM) 1.45m 0.54m Samsung Asset Management Co., Ltd. 0.42m 0.15m Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 9

10 Financial summary Profit and loss statement Crore (Yearend March) FY15 FY16 FY17E FY18E Net Sales Other Operating Income Total Operating Income 14, , , ,858.0 Growth (%) Mining & Mfg Expenses 5, , , ,998.1 Employee Expenses Admin & Selling expenses Total Operating Expenditure 7, , , ,590.5 EBITDA 7, , , ,267.5 Growth (%) Depreciation , ,190.3 Interest Other Income 2, , , ,988.0 PBT 9, , , ,014.4 Exceptional Item Total Tax 1, , ,402.9 PAT 8, , , ,611.5 Growth (%) EPS ( ) Cash flow statement Crore (Yearend March) FY15 FY16 FY17E FY18E Profit after Tax 8, , , ,611.5 Add: Depreciation , ,190.3 (Inc)/dec in Current Assets 1, , Inc/(dec) in CL and Provisions , , Others CF from operating activities 8, , ,420.3 (Inc)/dec in Investments 4, , , ,000.0 (Inc)/dec in Fixed Assets 1, , , ,000.0 Others CF from investing activities 6, , , ,000.0 Issue/(Buy back) of Equity Inc/(dec) in loan funds , ,000.0 Dividend paid & dividend tax 2, , , ,856.7 Inc/(dec) in Share Cap Others CF from financing activities 2, , , ,856.7 Net Cash flow , , Opening Cash 3, , ,735.9 Closing Cash 3, , ,299.5 Balance sheet Crore (Yearend March) FY15 FY16 FY17E FY18E Liabilities Equity Capital Reserve and Surplus 42, , , ,984.1 Total Shareholders funds 43, , , ,829.2 Total Debt , ,011.8 Deferred Tax Liability 2, , , ,571.4 Minority Interest / Others Total Liabilities 46, , , ,412.4 Assets 1, , ,000.0 Gross Block 14, , , ,789.6 Less: Acc Depreciation 3, , , ,872.0 Net Block 10, , , ,917.6 Capital WIP 1, , , ,610.1 Total Fixed Assets 11, , , ,527.6 Investments 27, , , ,682.6 Inventory 1, , , ,022.2 Trade receivables Loans and Advances 4, , , ,137.7 Other Current Assets Cash 3, , ,299.5 Total Current Assets 10, , , ,444.7 Trade payables Other current liabilities 1, ,246.1 Provisions 1, , ,963.2 Current Liabilities & Prov 2, , , ,242.6 Net Current Assets 7, , , ,202.1 Others Assets Application of Funds 46, , , ,412.4 Key ratios (Yearend March) FY15 FY16 FY17E FY18E Per share data ( ) EPS Cash EPS BV DPS Cash Per Share (Incl Invst) Operating Ratios (%) EBITDA Margin PBT / Total Op. income PAT Margin Inventory days Debtor days Creditor days Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt/EBITDA Debt / Equity Current Ratio Quick Ratio ICICI Securities Ltd Retail Equity Research Page 10

11 ICICIdirect.com coverage universe (Metals & Mining) Company CMP M Cap EPS ( ) P/E (x) EV/EBITDA (x) ROCE(%) ROE(%) ( ) TP ( ) Rating ( Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E Coal India Hold Hindalco Industries Hold Hindustan Zinc Hold JSW Steel Hold NM SAIL Hold NA NA 9.9 NA Vedanta Hold Tata Steel Hold NA ICICI Securities Ltd Retail Equity Research Page 9

12 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/10%; Sell: 10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 12

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