On July 31, Chelyabinsk Zinc Plant (RTS: CHZN) released unaudited Q107 financials. According to the data released, the company's revenue rose 70% y-o-y to $139 mln. Net profit soared 77% to $21 mln in the same period.
The main reasons behind this upbeat performance were a rise in zinc prices on the London Metal Exchange (LME) (average zinc price was $2,248 per ton in Q106 and $3,460 per ton in Q107) and incremental metal output and sales. The company's consolidated revenue includes $4.1 mln (2.9% of total revenue) of lead concentrate sales by Nova Zinc and $4.2 mln (3.0% of total revenue) of associated product sales, including sulphuric acid, cadmium and indium ($4.9 mln in Q106).
Q107 financial indicators
| | Q107 | Q106 | Chng |
| RR |
$ |
RR |
$ |
% |
| Revenue |
3643 |
139 |
2149 |
76 |
70% |
| Gross profit |
975 |
37 |
630 |
22 |
55% |
| Gross profit margin |
27% |
27% |
29% |
29% |
- |
| EBITDA |
1019 |
39 |
522 |
18 |
95% |
| EBITDA margin |
28% |
28% |
24% |
24% |
- |
| Pre-tax profit (loss) |
737 |
28 |
407 |
14 |
81% |
| Net profit |
551 |
21 |
310 |
11 |
78% |
| Net profit margin |
15% |
15% |
14% |
14% |
- |
Source: Company data, Finam estimates
The metal maker's gross profit rose 55% to $37 mln in Q107 compared to $22 mln in Q106. COGS amounted to $101 mln in Q107 and ensured gross profit margin of 27% (29% in Q106), while EBITDA margin strengthened from 24% to 28%.
The company's net profit soared 77% to $21 mln in three months ending March 31, 2007 compared to $11 mln in the same period 2006. We expect FY07 results to be much stronger than in 2006 due to high zinc prices and effective cost containment measures.
At present, in terms of industry average multiples, the price of ChZP should be around $231 per share, which implies 55% upside to current market valuations.
0.553
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