Hindustan Zinc Soars to 52-Week High on Record Silver Prices

Introduction

Hindustan Zinc Ltd, a Vedanta Group company, has seen its share price surge to new 52-week highs, rallying over 12% in recent sessions. The stock's strong performance is not based on speculation but is firmly rooted in a powerful combination of record-high silver prices, favorable global monetary conditions, and robust operational results. This has repositioned the company in the eyes of investors, shifting its perception from a traditional zinc producer to a strategic play on the global silver market.

The Global Silver Surge

The primary catalyst for the stock's rally is the extraordinary surge in global silver prices, which have nearly doubled over the past year. In late 2025, spot silver prices crossed the $19 per ounce mark, while on the Multi-Commodity Exchange (MCX) in India, futures surpassed the ₹2 lakh per kilogram milestone for the first time. This rally is underpinned by strong fundamentals, including a severe supply crunch intensified by low Chinese inventories and potential export restrictions from 2026. Furthermore, robust industrial demand from high-growth sectors such as solar energy, electric vehicles, and AI-linked electronics has structurally altered silver's demand profile. The US Federal Reserve's recent interest rate cuts have also boosted investor appetite for precious metals, making non-yielding assets like silver more attractive.

Hindustan Zinc's Strategic Advantage

Hindustan Zinc is uniquely positioned to capitalize on this silver upcycle. As the world's third-largest silver producer and India's only integrated producer, the metal is a critical component of its business, contributing 40-45% of its Earnings Before Interest and Tax (EBIT). A significant portion of the company's silver production is unhedged, allowing it to sell volumes at prevailing high spot prices. This direct exposure means that an estimated 88% of silver price gains flow directly into the company's EBITDA, providing a substantial earnings tailwind.

Strong Operational and Financial Performance

The company's solid operational performance has reinforced the positive macro trends. In the second quarter of FY26, Hindustan Zinc reported a 13.83% year-on-year increase in net profit to ₹2,649 crore on revenues of ₹34,083 crore. This was supported by record mined metal production and a five-year low in zinc production costs, which helped maintain strong EBITDA margins of around 52%. The momentum continued into the third quarter, with record mined metal production of 276 kilotonnes and a 10% sequential increase in silver output to 158 tonnes.

Market Reaction and Analyst Outlook

The market has responded enthusiastically to these developments. The stock has gained over 28% year-to-date in 2025, adding approximately ₹32,000 crore to its market capitalization in just six recent sessions. Reflecting this positive sentiment, brokerage firm Jefferies initiated coverage with a 'Buy' rating and a target price of ₹660 per share. Analysts project strong earnings per share (EPS) growth of 22% in FY26 and 29% in FY27, citing the company's low-cost operations and the increasing contribution of silver to its profitability. While the stock trades above its long-term average valuation, this is considered justified by the enhanced earnings profile.

The Role of Base Metals

While silver currently dominates the narrative, Hindustan Zinc's core operations in zinc and lead provide stability. Global zinc prices have faced headwinds from oversupply and weak demand in the construction sector. However, the company's position as a first-decile low-cost producer has helped protect its margins. Lead prices have remained range-bound, offering stable, albeit modest, earnings support. The exceptional performance of silver has more than compensated for any softness in the base metals segment.

Investment Risks to Consider

Despite the bullish outlook, investors should remain aware of potential risks. The company's earnings are highly sensitive to commodity price fluctuations, and a sharp correction in silver or zinc prices could impact profitability. The stock is currently trading near its 52-week highs, which could lead to near-term volatility. Additionally, a significant portion of the promoter's holdings (over 90%) are pledged, which could amplify downside risk during a market downturn, although the company maintains a strong balance sheet.

Conclusion

Hindustan Zinc's recent rally highlights a fundamental shift in its market perception, establishing it as a prime proxy for the global silver upcycle. With silver contributing nearly half of its operating profit and long-term demand drivers appearing structural, the company's earnings visibility remains strong. Supported by low-cost operations and plans to nearly double its silver capacity by 2030, Hindustan Zinc is well-positioned to continue benefiting from the ongoing strength in the precious metals market.