Hindustan Zinc Upgraded by HSBC, Target Price Raised to ₹750

Introduction to the Sector Upgrade

Shares of Hindustan Zinc surged over 4% on Monday, reaching an intraday high of ₹663, following a significant ratings upgrade from international brokerage HSBC. The firm upgraded the stock to 'Buy' from a previous 'Hold' recommendation and increased its target price to ₹750 per share, suggesting a potential upside of 18%. This move comes just ahead of the company's scheduled third-quarter earnings announcement. The positive revision reflects a broader optimistic outlook on the metals sector, as HSBC also raised target prices for Hindalco and National Aluminium Company (NALCO).

Rationale Behind Hindustan Zinc's Upgrade

HSBC's decision to upgrade Hindustan Zinc is rooted in revised forecasts for key commodity prices. The brokerage has incorporated updated London Metal Exchange (LME) zinc and silver price predictions, leading to a 5% to 23% increase in its assumptions for the fiscal years 2026 to 2028. Consequently, this has boosted the company's projected EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) estimates for FY2027–28 by 12% to 20%.

Reflecting this improved earnings outlook, HSBC has adjusted its valuation methodology for the company. Hindustan Zinc is now valued at 11 times its FY27 estimated EV/EBITDA, a notable increase from the previous multiple of 9.5x. This new valuation places the company at the higher end of its five-year trading range of 5x to 11x. The brokerage justifies this premium by pointing to Hindustan Zinc's strong balance sheet and the stable-to-improving price environment for both zinc and silver. HSBC also noted that there is potential for further earnings upside if spot LME zinc and silver prices remain at their current levels.

Target Price Hikes for Hindalco and NALCO

HSBC's positive sentiment extends to other major players in the Indian metals space. The brokerage raised the target price for Hindalco to ₹1,240 from ₹1,060, implying a substantial 33% upside. This revision was driven by a 7% to 10% increase in EBITDA estimates for FY2027–28, based on higher global LME aluminium and copper price forecasts. Specifically, HSBC increased its FY2026–28 aluminium price assumptions by 5% to 16% and its copper forecasts by 5% to 20%.

For National Aluminium Company (NALCO), the target price was increased to ₹420 from ₹373, suggesting a 16% upside. This adjustment followed a roughly 16% increase in EBITDA estimates for FY2027–28, which incorporated updated global LME aluminium and alumina price forecasts. HSBC highlighted improvements in NALCO's operating model, such as the commencement of captive coal mining and an expected new captive bauxite mine, as factors supporting its valuation.

Summary of HSBC's Revisions

HSBC's Broader Commodity Outlook

The brokerage's analysis points to a tightening supply in the global aluminium market, suggesting that any increase in demand is likely to drive prices higher. Reflecting this view, HSBC has raised its calendar year 2026 and 2027 LME aluminium price assumptions by approximately 16% and 14%, respectively, to $1,200 and $1,250 per tonne. The firm expects that metals with high exposure to energy transition demand, along with safe-haven metals, will continue to outperform those tied to traditional demand cycles. Overall, price forecasts for most metals have been revised upward on expectations of resilient demand, constrained supply, and a weaker U.S. dollar. Platinum, copper, and rhodium remain preferred metals, with aluminium now joining this category.

Market Reaction to the News

The market responded positively to HSBC's revised outlook. On Monday, Hindustan Zinc's shares rallied over 4% to close near the day's high of ₹663. Hindalco's stock rose over 1% to ₹947, while NALCO gained nearly 2% to trade at ₹376 on the BSE. The broad-based gains underscore investor confidence in the brokerage's positive assessment of the sector's fundamentals.

Analysis and Forward Look

The series of upgrades from HSBC signals growing confidence in a sustained commodity upcycle. The focus on a strong balance sheet for Hindustan Zinc and operational efficiencies for NALCO indicates that fundamentals are a key part of the investment thesis, beyond just rising commodity prices. For investors, this provides a clear view of how global macroeconomic trends, such as the energy transition and U.S. dollar movements, are directly impacting the valuations of Indian metal producers. The upcoming Q3 results for Hindustan Zinc will be a critical event, providing the first opportunity to see if the company's performance aligns with the brokerage's optimistic earnings forecasts.

Conclusion

HSBC's upgrade of Hindustan Zinc and other metal stocks has provided a significant boost to the sector. The revisions are backed by detailed forecasts of rising commodity prices and improved earnings potential. As the market digests this new information, all eyes will be on the upcoming corporate earnings and the continued trajectory of global metal prices to validate this bullish stance.