Hindustan Zinc Ltd, backed by the Vedanta Group, is showing promising potential for a nearly 14% increase in the short term. Motilal Oswal has recently issued a Neutral rating for the stock, setting a target price of Rs 570, while it currently trades around Rs 501. This rating follows the company’s quarterly earnings, which aligned with estimates, and its commitment to enhancing production alongside strict cost control.
As a leading metal stock and a prominent dividend payer in the large-cap sector, Hindustan Zinc recently experienced a slight decline of 1.2% in its stock price, ending at Rs 501.55 with a market capitalization of Rs 2,11,920.87 crore. The stock’s price-to-earnings ratio stands at 24.26x, and it boasts a strong return on equity of 114.32%.
In Q2 FY25, Hindustan Zinc reported revenue of INR 83 billion, marking a 22% year-on-year increase and a 2% quarter-on-quarter rise, driven by improved metal and silver volumes as well as higher zinc and silver prices. The YoY growth was supported by a strong dollar, though it was slightly offset by lower lead prices. Motilal Oswal noted that the decline in the cost of production (CoP) was attributed to better ore grades and a reduction in coal and input commodity prices.
The company has also commenced sourcing renewable energy from the 180 MW Serentica Renewables solar project, which increased the share of renewable energy in its total power requirements to 14% in Q2 FY25, up from 8.5% in the previous quarter. This shift has helped reduce energy costs by USD 9 per tonne during the quarter.
On the valuation front, Hindustan Zinc is trading at 8.8x FY27E EV/EBITDA, which Motilal Oswal believes reflects all positive factors in the current valuation. The brokerage retains its earnings estimates, emphasizing the company’s focus on profitability.
Additionally, Hindustan Zinc’s CEO, Arun Misra, has indicated that the company is considering splitting its business into two units, with discussions ongoing with the government. Misra stated, “Hindustan Zinc believes in value creation through demerger and will continue pursuing this, disinvestment or no disinvestment, both ways.”
As the world’s second-largest integrated zinc producer and the third-largest silver producer, Hindustan Zinc commands a market share of approximately 75% of India’s primary zinc market and supplies to over 40 countries.
Overall, with its strong financial performance and strategic initiatives, Hindustan Zinc is definitely a stock worth monitoring.
Disclaimer: This content is for informational purposes only and should not be considered financial advice. Investing in stocks involves risks, and past performance is not indicative of future results. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The information provided here is based on publicly available data and is subject to change.
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