Hindustan Zinc Share Price Soars on Jefferies' Buy Call

Hindustan Zinc Hits 52-Week High on Positive Brokerage Report

Shares of Hindustan Zinc Ltd, a Vedanta Group company, climbed over 2% on December 15, reaching a new 52-week high of Rs 571.80. This marked the fifth consecutive session of gains for the stock, which has surged approximately 17% in this period. The rally was primarily fueled by a positive initiation report from global brokerage firm Jefferies and a significant upswing in global silver prices.

Jefferies Initiates Coverage with a 'Buy' Rating

Jefferies has initiated coverage on Hindustan Zinc with a 'Buy' recommendation and a target price of Rs 660 per share. This target implies a potential upside of more than 17.5% from the stock's previous closing price. The brokerage's bullish stance is based on the company's position as a major beneficiary of rising silver and zinc prices, supported by its cost-efficient mining operations, which are in the first decile of the global zinc mining cost curve.

The firm projects a strong earnings trajectory for Hindustan Zinc, forecasting Earnings Per Share (EPS) to grow by 22% in FY26 and 29% in FY27, followed by a 7% increase in FY28. These estimates are notably 9% to 31% higher than the current consensus on the street.

The Silver Lining: Commodity Prices Drive Momentum

The recent surge in Hindustan Zinc's stock is closely linked to the sharp rally in silver prices. Silver futures on the Multi Commodity Exchange (MCX) have been scaling record highs, with the March expiry contract crossing the Rs 2 lakh per kilogram mark. Globally, spot silver prices have also surpassed the $10 per ounce milestone. As India's largest silver producer, Hindustan Zinc is uniquely positioned to capitalize on this trend.

Jefferies noted that while silver prices have doubled in 2025 to around $12 at spot, their financial models assume a more conservative range of $16-60 for the second half of FY26 through FY28. The full benefit of the current high prices is expected to significantly boost the company's EBITDA in FY27, especially since Hindustan Zinc has hedged 37% of its 2HFY26 silver volumes at a lower price of $17.

Financial Health and Future Outlook

Hindustan Zinc's financial position remains robust, characterized by strong cash generation and high return on equity (ROE). Between FY21 and FY25, the company generated an average free cash flow of about Rs 10,500 crore annually and delivered an average ROE of 45%. Looking ahead, Jefferies forecasts annual free cash flow to be between Rs 8,000 crore and Rs 14,800 crore for FY26-28, with ROE expected to remain elevated in the 69-85% range.

The company has also demonstrated significant improvements in cost efficiency. The cost of zinc production has declined from a peak of $1,257 per tonne in FY23 to $1,002 in the first half of FY26, driven by better ore grades, increased use of domestic coal, and a higher contribution from renewable energy sources.

Key Projections and Metrics

Valuation and Market Position

The stock is currently trading at an enterprise value to EBITDA (EV/EBITDA) multiple of 9.2 times its FY27 earnings estimates. This is above its long-term average of 7.3 times. However, Jefferies argues that this premium valuation is justified. The rationale is the increasing contribution of silver to the company's overall profitability. In FY25, silver accounted for 38% of the company's EBIT, and this share is expected to grow, supporting a higher valuation multiple.

Hindustan Zinc is the world's largest integrated zinc producer and ranks among the top five global silver producers, giving it a commanding position in the market.

Potential Risks to Consider

Despite the positive outlook, Jefferies highlighted several key risks that could affect the company's performance. These include a potential downturn in global silver or zinc prices, a decline in mine grades, challenges related to mine renewals after 2030, and any adverse related-party transactions.

Conclusion

Hindustan Zinc's share price rally is supported by strong fundamentals, a favorable commodity price environment, and a positive outlook from market analysts. The 'Buy' rating from Jefferies underscores the company's potential for significant earnings growth, driven by its cost leadership in zinc and its increasing leverage to the silver market. While investors should remain aware of the inherent risks in the commodity sector, the company's robust cash flows and high return metrics present a compelling case for its future performance.