- Jefferies raised Hindustan Zinc target to Rs 750, citing higher zinc and silver prices
- Zinc prices surged 31% since March due to supply issues and lower mine output
- Hindustan Zinc EPS estimates for FY27-29 increased 10-11%, above street consensus
Brokerage Jefferies has turned more constructive on Hindustan Zinc than on Hindalco, as a sharp divergence in metal prices lifts earnings prospects for the former while weighing on the latter.
In a note dated August 25, Jefferies said spot zinc prices are running 15% above the June-quarter average and silver has recovered 23% from its July lows. Aluminium, on the other hand, is trading 10% below its June-quarter average.
Hindustan Zinc: Buy call reiterated, target raised to Rs 750
Jefferies retained its Buy rating on Hindustan Zinc and raised the target price to Rs 750 from Rs 660 earlier, implying an upside of 27% and a total shareholder return of 31%, including a 4% dividend yield.
The brokerage raised its FY27-29 earnings per share (EPS) estimates for the company by 10-11%, factoring in higher zinc and silver price assumptions. Its estimates are now 16-23% above street consensus. Jefferies said Hindustan Zinc's FY28 EPS could see a further upgrade of 12% if spot metal prices sustain at current levels.
The brokerage attributed the zinc rally to supply constraints. Zinc prices have risen 31% since March to $3,966 a tonne, driven by declining mine output, operational disruptions such as fires and delays, lower ore grades, and limited new project development outside China. The International Lead and Zinc Study Group (ILZSG) has revised its 2026 global zinc market forecast to a deficit of 19,000 tonnes, from a surplus of 271,000 tonnes estimated earlier.
Jefferies on Hindustan Zinc and Hindalco.
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On silver, Jefferies said it remains constructive on precious metals, citing widening fiscal deficits, elevated debt levels and ongoing currency debasement as factors that remain underappreciated by markets. Silver prices have rebounded 23% to $68 an ounce after a 37% fall between May and July.
Jefferies expects Hindustan Zinc's net cash position to rise from Rs 5,200 crore in FY26 to Rs 22,700 crore by FY29. At 7.5 times one-year forward EV/EBITDA (enterprise value to earnings before interest, tax, depreciation and amortisation), the brokerage said the stock's valuation is slightly below its 10-year average of 7.8 times and remains reasonable.
Hindalco: Hold rating retained, estimates cut
Jefferies retained its Hold rating on Hindalco and raised the target price marginally to Rs 1,140 from Rs 1,100, as it rolled forward its valuation base to September 2028. The revised target implies an upside of 9%.
The brokerage cut its FY27-29 EPS estimates for Hindalco by 2-3%, citing lower aluminium price assumptions. Aluminium prices rose 22% between March and June but have since corrected 16% to $3,212 a tonne, now 10% below the June-quarter average.
Jefferies said supply disruptions in the Middle East led to a 4% year-on-year decline in ex-China aluminium production in the first half of calendar year 2026, though a 2% rise in Chinese output largely offset this, keeping global production broadly stable. Supply could improve further as disrupted Middle East capacity returns, with Emirates Global Aluminium targeting normal production by the first quarter of calendar year 2027 and Aluminium Bahrain indicating repairs are largely complete.
The brokerage flagged rising leverage as a key concern for Hindalco, with net debt up 74% in FY26 and expected to rise a further 13% year-on-year in FY27, led by ongoing capital expenditure at Novelis and elevated working capital requirements. Jefferies expects net debt to start easing from FY28.
Hindalco trades at 1.3 times one-year forward price-to-book for a return on equity (RoE) of 15-18%, against its long-term average of 0.9 times for an 11% RoE, valuations Jefferies described as not expensive.
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