Target: ₹660
CMP: ₹568.05
We initiate on Hindustan Zinc with Buy rating and ₹660 price target including 4 per cent dividend yield.
Hindustan Zinc (HZ) is world’s largest integrated zinc producer with 1.12mtpa refined metal capacity, and is among top-5 in silver with 800t capacity. Zinc and lead formed 62 per cent of FY25 EBIT while silver contributed 38 per cent. In zinc, HZ is in first-decile of mining and first-quartile of smelting cost curve.
Silver price has doubled in 2025 to $62 at spot. HZ expects global silver market to remain in deficit in 2025; we assume silver prices of $56-60 in 2HFY26-FY28 (3-10 per cent below spot). With HZ hedging 37 per cent of its H2-FY26 silver volumes at $37, the full price benefit will come in FY27, providing a big EBITDA boost. 2025 has been a tale of two halves for zinc with global price falling 14 per cent to $2,541 over Jan-Apr but then rising 33 per cent to $3,376 at spot.
HZ is expanding its refined metal capacity by 34 per cent to 1.5 mtpa and silver capacity by 4 per cent to 830 tpa by Q2-FY29; it is targeting 2mtpa refined metal and 1,500t silver by 2030.
Over FY21-25, HZ generated average FCF of ₹105 billion and ROE at 45 per cent. It has a healthy balance sheet with FY25 net-debt/EBITDA at just 0.1x. We expect strong FCF at ₹80-148 billion/year and 69-85 per cent ROE over FY26-28.