Hindustan Zinc Shares In Focus: Jefferies Initiates Buy Call Backed By Silver Play — Check Target Price

Jefferies on Monday has initiated coverage on Hindustan Zinc Ltd. with a Buy rating and a target price of Rs 660 due to attractive play on rising silver and zinc prices, supported by the company’s first-decile zinc mining costs and strong cash generation. The target price implies an upside of around 22%, including a dividend yield of about 4%.

Hindustan Zinc is expected to deliver strong earnings growth despite only modest volume expansion. Jefferies forecasts EPS growth of 22% in fiscal 2026 and 29% in financial year 2027, followed by a further 7% increase in fiscal 2028.

Robust cash flows and return on equity underpin this outlook, with Jefferies’ FY26–28 EPS estimates standing 9–31% above consensus expectations. While the stock trades above its long-term average of 7.3x, this valuation premium is seen as justified by the rising contribution of silver to overall earnings, the brokerage noted.

As the world’s largest integrated zinc producer, Hindustan Zinc has a refined metal capacity of 1.12 mtpa and ranks among the top five silver producers globally, with an annual capacity of around 800 tonnes.

In the last financial year, zinc and lead accounted for 62% of EBIT, while silver contributed a significant 38%. The company sits in the first decile of the global zinc mining cost curve and the first quartile in smelting, reinforcing its competitive positioning.

Silver is expected to be a key driver of Ebitda growth, Jefferies said in its report. This is majorly as silver prices have doubled in 2025 to around $62 at spot, and the global market is projected to remain in deficit. Jefferies assumes silver prices of $56–60 during second half of this fiscal to financial year 2028, which is 3–10% below current spot levels.

With Hindustan Zinc having hedged 37% of its second half of this years silver volumes at $37, the full benefit of higher prices is likely to be realised from financial year 2027 onwards, providing a meaningful uplift to Ebitda.

The global zinc market also remains tight. After falling 14% between January and April 2025, zinc prices have rebounded 33% to around $3,376 at spot. According to Jefferies’ global team, low inventories should keep the market tight, although prices are expected to remain range bound. The brokerage assumes zinc prices of $3,225–3,250 over the second half of this fiscal to financial year 2028, roughly 4% below current spot levels.

Capacity expansion is planned but remains some years away. Hindustan Zinc is increasing refined metal capacity by 34% to about 1.5 mtpa and silver capacity by 4% to 830 tonnes by second quarter of fiscal 2029. Longer-term targets include 2 mtpa of refined metal and 1,500 tonnes of silver by 2030. Until these expansions come on stream, Jefferies expects metal sales to grow at a modest 2% CAGR over FY25–28.

Cost control remains a key strength. Reported zinc cost of production, excluding royalty, has fallen from a peak of $1,257 in financial year 2023 to $1,002 in the first half of this fiscal. This improvement reflects better ore grades, higher domestic coal usage, lower global coal prices and an increasing share of renewable energy.

Costs are expected to remain largely range-bound over FY26–28, as efficiency gains and renewable power offset pressures from deeper mining and grade variability.

Hindustan Zinc’s financial position is another positive the brokerage added. Between fiscal 2021 and fiscal 2025, the company generated average free cash flow of around Rs 10,500 crore and delivered ROE of about 45%. The balance sheet is strong, with fiscal 2025 net debt to Ebitda at just 0.1x. Jefferies expects annual free cash flow of Rs 8,000–14,800 crore and ROE in the range of 69–85% over fiscal 2026–2028.