Hindustan Zinc (HZL) shares experienced a significant surge in early Wednesday trading, climbing nearly 6% to reach a high of Rs 677.10. The rally followed the government's decision to increase the customs duty on silver from 6% to 15%, a move expected to benefit HZL, one of the world's top five silver producers.
Analyst Optimism and Price Target
SBI Securities, a prominent domestic brokerage, issued a 'Buy' recommendation for Hindustan Zinc, citing attractive valuations. The firm set a 12-month target price of Rs 748, suggesting a potential 15% upside from Tuesday's closing price.
The brokerage highlighted several factors underpinning its positive outlook for the Vedanta-promoted company:
- Robust Demand Forecast: India's strong infrastructure push is anticipated to drive steel demand to 300 million tonnes by 2030. This growth is projected to create a domestic demand for 2 million tonnes of zinc and lead, positioning Hindustan Zinc as a key beneficiary given its status as the world's largest integrated zinc producer.
- Strategic Mineral Acquisitions: HZL has successfully secured three critical mineral blocks, including a tungsten block in Andhra Pradesh, where exploration commenced in Q4.
Key Risks Identified
Despite the positive outlook, SBI Securities noted potential risks that could impact HZL's performance. These include unfavorable fluctuations in global zinc and silver prices, as well as any delays in the company's planned capacity expansion projects.
Vedanta's Stake and Market Context
As of March 31, Vedanta Ltd holds a substantial 60.71% stake in Hindustan Zinc, amounting to over 2.56 billion HZL shares. The positive sentiment surrounding HZL also extended to its promoter, Vedanta, whose shares were trading up by 5.46% at Rs 321.70 on the same day.
This development comes amidst broader market discussions, including a recent government announcement on royalty cuts for oil exploration, which CLSA noted would reduce royalties for Vedanta's Rajasthan fields from 16.67% to 10.6%.