Hindustan Zinc shares can rally to Rs 660, says Jefferies after initiating with Buy. Here’s why

Shares of Hindustan Zinc rallied as much as 2% to their day’s high of Rs 572 in morning deals on December 15, after international brokerage firm Jefferies initiated coverage with a Buy rating, citing record silver prices as one of the biggest drivers of growth in the coming quarters. With today’s surge, the stock is up 17% in 5 sessions.

With a price target of Rs 660 per share, Jefferies forecasts an 18% from current levels. Hindustan Zinc stands out as a key beneficiary of rising silver and zinc prices, supported by its first-decile zinc mining costs. While volume growth is expected to remain modest, earnings are projected to expand sharply, with EPS growth of 22% in FY26 and 29% in FY27, followed by a further 7% increase in FY28, Jefferies said in a note dated December 14.

Strong cash generation and healthy return on equity underpin this outlook, with FY26–28 EPS estimates 9–31% higher than Street expectations. Although the stock trades at 9.2x FY27E EV/EBITDA—above its long-term average of 7.3x—the valuation is seen as justified given the rising contribution of silver to overall profitability.

Silver prices have surged in 2025, doubling to about $65 at spot, and Hindustan Zinc expects the global silver market to remain in deficit through the year. The company assumes silver prices in the $56–60 range during 2HFY26–FY28, around 3–10% below current spot levels. With nearly 37% of its 2HFY26 silver volumes hedged at $37, the bulk of the upside from higher prices is likely to flow through to earnings in FY27, delivering a meaningful boost to EBITDA.

Hindustan Zinc has seen a sharp improvement in cost efficiency, with reported zinc cost of production (excluding royalty) declining from a peak of $1,257 in FY23 to $1,002 in 1HFY26. The reduction has been driven by better ore grades, higher use of domestic coal, softer global coal prices and a rising contribution from renewable energy. Looking ahead, the company expects costs to remain largely range-bound through FY26–28E, as efficiency gains and increased renewable power usage are likely to offset pressures from deeper mining and variability in ore grades.

The company’s strong operating performance continues to translate into robust cash generation and returns. Over FY21–25, Hindustan Zinc generated average free cash flow of about Rs 10,500 crore annually, while delivering an average return on equity of 45%. Its balance sheet remains healthy, with net debt to EBITDA at just 0.1x in FY25. Going forward, free cash flow is expected to remain strong at around Rs 8,000–14,800 crore per year, alongside an elevated ROE of 69–85% over FY26–28E.

The company is the world’s largest integrated zinc producer, with refined metal capacity of 1.12 million tonnes per annum, and also ranks among the top five global silver producers with capacity of about 800 tonnes. In FY25, zinc and lead together accounted for 62% of EBIT, while silver contributed the remaining 38%. Hindustan Zinc’s cost competitiveness remains a key strength, with zinc operations positioned in the first decile of the mining cost curve and the first quartile of smelting costs, Jefferies said. At about 9:35 am, shares of the company were trading at Rs 568, higher by 1.2% from the last close on the NSE. Hindustan Zinc shares are up nearly 20% in the last 1 month and about 30% on a YTD basis.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)