OREANDA-NEWS. August 02, 2010. Chelyabinsk Zinc Plant (CZP) released operational results for 1H10. In the second quarter CZP’s production of zinc and zinc alloys rose 9% QoQ to 42,003t, up from 38,570t in 1Q10. For 1H10, production climbed 56% YoY to 80,573t, of which 43.7% was supplied to the domestic market. CZP’s subsidiary, the Brock Metal Company Limited (the leading UK supplier of zinc die-casting alloys) sold 14,713t of products in 1H10, 45% higher than in 1H09 (9,785t), reported the press-centre of OTKRITIE Financial Corporation.

View: The results were in line with our expectations hence we see them as neutral for the stock. By year’s end we anticipate production volumes of 153,000t of zinc and zinc alloys, reflecting a 37% rise YoY. Due to rising domestic demand we also expect domestic sales to consume 50% of total output by YE10.

Valuation and Action: Chelyabinsk Zinc appears cheap on a relative basis, trading with roughly a 48% discount on 2010 P/E 2010 to global peers. Our target price for Chelyabinsk Zinc is USD5.5/share, which implies a 50% upside from current prices. We reiterate our BUY rating on stock.