Hindustan Zinc shares could rise to Rs 660, says Jefferies after initiative with Buy. This is why

Shares of Hindustan Zinc rose as much as 2% to a day’s high of Rs 572 in the morning deals on December 15 after global brokerage firm Jefferies covered Jefferies with a Buy rating, citing record silver prices as one of the biggest drivers of growth in the coming quarters. With today’s rise, the stock is up 17% in 5 sessions. With a price target of Rs 660 per share, Jefferies predicts a price target of 18% from current levels. Hindustan Zinc stands out as a key beneficiary of rising silver and zinc prices, supported by zinc mining costs in the first decile. While volume growth is expected to remain modest, profits are expected to rise sharply, with earnings per share up 22% in FY26 and 29% in FY27, followed by a further 7% increase in FY28, Jefferies said in a Dec. 14 note.

Strong cash generation and healthy returns on equity support this outlook, with FY26-28 EPS estimates 9-31% higher than Street expectations. While the shares trade at 9.2x FY27E EV/EBITDA – above the long-term average of 7.3x – the valuation is seen as justified given silver’s rising contribution to overall profitability.

Silver prices have risen sharply in 2025, doubling to around $65 locally, and Hindustan Zinc expects the global silver market to remain in deficit throughout the year. The company expects silver prices to be in the range of $56 to $60 over the period 2HFY26 through FY28, approximately 3 to 10% below current spot levels. With nearly 37% of silver volumes hedged at $37 in H2 2026, most of the upside potential from higher prices is likely to feed into FY27 earnings, providing a meaningful boost to EBITDA.

Hindustan Zinc has seen a sharp improvement in cost efficiency, with reported zinc production costs (excluding royalties) falling from a peak of $1,257 in FY23 to $1,002 in 1HFY26. The decline was caused by better ore qualities, higher use of domestic coal, softer global coal prices and an increasing contribution from renewable energy. Looking ahead, the company expects costs to remain largely within range in fiscal 26-28E as efficiency improvements and increased use of renewable energy are likely to offset the pressures of deeper mining and variability in ore grades.

The company’s strong operating performance continues to translate into robust cash generation and returns. During FY21-25, Hindustan Zinc generated an average free cash flow of around Rs 10,500 crore per annum while delivering an average return on equity of 45%. The balance sheet remains healthy, with net debt/EBITDA of just 0.1x in FY25. Going forward, free cash flow is expected to remain strong at around Rs 8,000–14,800 crore per annum, alongside a higher return on equity of 69–85% over FY26–28E.

The company is the world’s largest integrated zinc producer, with a refined metal capacity of 1.12 million tonnes per year, and is also one of the top five global silver producers with a capacity of approximately 800 tonnes. In FY25, zinc and lead together accounted for 62% of EBIT, while silver contributed the remaining 38%. Hindustan Zinc’s cost competitiveness remains a key strength, with its zinc business in the first decile of the mining cost curve and the first quartile of smelting costs, Jefferies said. At around 9.35 am, the company’s shares were trading at Rs 568, up 1.2% from the last close on the NSE. Shares of Hindustan Zinc are up almost 20% in the past month and around 30% on a YTD basis.

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of the Economic Times)