Vedanta-promoted Hindustan Zinc Ltd (HZL) is poised for significant growth, with several top brokerages projecting an average return of nearly 20% for its shares over the next 12 months. This optimistic outlook follows the company's robust June quarter results.
Brokerage Targets and Outlook
According to Bloomberg data compiled by Business Today, the consensus target price for HZL stands at Rs 636.67, indicating a potential upside of 19.7% from its current market price. HSBC has set the highest target at Rs 770, while Citi offers the most conservative estimate at Rs 480.
Of the eight brokerages that published reports after HZL's Q1 earnings, all but Citi have either a 'Buy' or 'Neutral' rating on the stock. Other notable targets include:
- Jefferies: Rs 660
- 360 One Capital Markets: Rs 725
- Nuvama: Rs 700
- Systematix: Rs 669
- MOFSL: Rs 570 (Neutral rating)
Driving Factors for HZL's Performance
Analysts point to several key factors contributing to HZL's strong performance and future potential. MOFSL highlighted that HZL continues to report robust earnings, primarily driven by favorable metal pricing and better ore grades. The company's focus on increasing production output coupled with tighter cost-control measures is expected to sustain margins.
Nuvama analysts noted that a tight supply market is likely to keep zinc prices relatively high, while silver prices are also expected to remain firm. Nuvama forecasts a 3% volume CAGR for refined metal and a 4% volume CAGR for silver over the financial years 2026-2028. They also project that higher prices and effective cost control will drive an Ebitda (Earnings Before Interest, Taxes, Depreciation, and Amortization) CAGR of 20% during the same period.
Expansion Plans and Long-Term Visibility
Hindustan Zinc's recently announced expansion plans are seen as crucial for its long-term growth. Nuvama expects the 250ktpa zinc smelter expansion to be commissioned by Q2FY29. MOFSL views these expansion initiatives as aligned with the company's objective of doubling existing capacity, which enhances long-term earnings visibility.
While near-term earnings growth might be constrained by limited capacity headroom, MOFSL believes that LME (London Metal Exchange) and silver price inflation could serve as key catalysts for incremental upside. Emkay Global echoed this sentiment, noting that strong production volumes and supportive zinc and silver prices are expected to aid earnings throughout FY27, with higher silver volumes largely offsetting any near-term impact from lower silver prices.
"We believe strong production volumes as well as supportive zinc and silver prices will continue aiding earnings through FY27, while any near-term impact from lower silver prices would be largely offset by higher silver volumes," said Emkay Global.
Despite the positive outlook, MOFSL suggests a 'Neutral' rating, believing that HZL's current valuation at prevailing market prices has already factored in many positive developments. Investors are advised to consult with a qualified financial advisor before making any investment decisions.