Shares of Hindustan Zinc Ltd (HZL), a Vedanta group company, have experienced a 15% decline over the past six months. Despite this downturn, Antique Stock Broking has maintained a 'Hold' rating on the stock, even while projecting a significant 24% potential upside from its current price.
Analyst Outlook and Growth Drivers
Antique Stock Broking anticipates an 8% year-on-year growth in domestic zinc demand. This expected surge is attributed to India’s escalating infrastructure investments, increasing domestic steel production, and broader adoption of galvanized steel. Furthermore, a revival in Chinese domestic consumption is expected to support a stable global zinc price outlook.
The brokerage firm highlighted several factors likely to bolster HZL's profitability:
- Capacity expansion initiatives
- Sustained firm prices for zinc and silver
- Expected reduction in operational costs
Strategic Expansion and Capex Plans
Hindustan Zinc has outlined ambitious capital expenditure plans to drive future growth and diversification. The company's FY27 growth capex guidance stands at $500-600 million, targeting several key projects:
- Hot Acid Leaching Plant: Commissioning of this plant is expected by 2QFY27, aiming to produce 27 tons of silver and 6,000 tons of lead annually from smelting waste at Dariba.
- Fertilizer Plant: A new 510 ktpa fertilizer plant is also slated for completion by 2QFY27.
- Integrated Zinc Metal Complex: HZL plans to establish a 250 ktpa integrated zinc metal complex at Debari with a significant investment of Rs 12,000 crore.
- Tailings Reprocessing Plant: The board has approved India’s first tailings (waste residue) reprocessing plant with a capacity of 10 mtpa, designed to extract zinc and silver from existing waste stockpiles at Rampura Agucha mines.
Additionally, HZL has secured three new critical mineral blocks, aligning with its strategy for diversification and aiming for two-fold growth as the world’s largest integrated zinc producer and sixth-largest silver producer.
Financial Performance and Production Targets
At the end of FY26, Hindustan Zinc reported robust financial health with gross investments, cash, and cash equivalents of Rs 13,850 crore (up 48.2% QoQ) and total outstanding borrowings of Rs 8,250 crore (down 8.4% QoQ), resulting in a net cash position of Rs 5,590 crore.
For FY27, the management targets significant production increases:
- Mined metal production: 1,150 KT (up 3.2% YoY)
- Refined metal production: 1,100 KT (up 4.9% YoY)
- Silver production: 680 tons (up 8.5% YoY)
Despite a recent correction in MCX Silver prices, they remain 16% above the FY27 estimate, a crucial point given the silver segment contributed 45% to FY26 consolidated Ebit. Antique valued HZL at 9 times estimated EV/Ebitda for FY28, setting a target price of Rs 660.