Hindustan Zinc bulls cheer silver boost, bears flag rich valuations; check price targets

Hindustan Zinc Ltd. reported a strong set of third quarter results, aided by higher LME prices and lower cost of production. The company also turned net cash positive once again.

Hindustan Zinc's Q4 is expected to be even stronger, with commodity prices, especially silver, having spiked further.

For the quarter, Hindustan Zinc's revenue came in at ₹10,922 crore, comfortably above the CNBC-TV18 poll estimate of ₹10,219 crore. Net profit rose to ₹3,879 crore, beating the poll estimate of ₹3,493 crore.

EBITDA stood at ₹6,005 crore versus the poll of ₹5,614 crore, while EBITDA margin was reported at 55%, marginally ahead of the estimated 54.9%.

While valuations remain rich at around 10 times its EV/EBITDA, brokerages said that Hindustan Zinc commands a premium as the only listed pure-play exposure to silver in India.

How brokerages reacted to HZL Q3

HSBC maintained a 'Buy' rating on the stock with a price target of ₹750. The brokerage said the Q3 earnings beat was driven by higher volumes and lower costs.

HSBC added that strong silver prices, with spot prices near $93 compared with the Q3 average of $54.7, along with a weaker rupee, should further support earnings.

It expects Q4 to be stronger on higher volumes and sharply higher silver prices.

Jefferies also reiterated its 'Buy' rating and raised its price target to ₹750, citing a solid Q3 performance.

The brokerage said HZL stands to benefit from rising silver prices, with spot prices nearly 66% above the December quarter average, while zinc prices remain firm and costs are well controlled.

Jefferies raised its FY26-28 EPS estimates by 3% to 10% and expects EPS growth of 47% YoY in FY27, followed by 6% growth in FY28.

Although the stock trades at 9.4x FY27E EV/EBITDA, above its long-term average of 7.3x, Jefferies believes the valuation is justified due to the rising share of silver in overall EBIT.

On the other hand, Citi retained a 'Sell' recommendation with a price target of ₹585.

The brokerage said that HZL is targeting refined volume growth of just 2% in FY26 and expects cost of production at around $1,000 per tonne, compared with $980 for the first nine months.

Nuvama maintained a 'Reduce' rating on the stock with a price target of ₹591. It said the company reported an in-line Q3 EBITDA, driven by higher commodity prices, better volumes and lower costs.

Silver EBIT surged 56% QoQ to ₹2,290 crore and accounted for 44% of total EBIT in Q3.

Nuvama also mentioned that the company has judiciously hedged 7% of FY27E zinc volumes at $3,117 per tonne and 8% of silver volumes at $58 per ounce, offering downside protection.

The brokerage has revised its average zinc and silver price assumptions to $3,000 and $2,900 per tonne, and $60 and $55 per ounce for FY27E and FY28E, respectively, which lifts EBITDA estimates by 28% for FY27E and 21% for FY28E.

However, it flagged that the stock remains expensive, trading at 11.1x FY28E EV/EBITDA.

Ahead of the earnings announcement, shares of Hindustan Zinc closed 3.53% higher on Monday at ₹660.25.