HINDZINC

: Firm Commodity Prices Keep Investor Interest Alive

shares have surged nearly 38% in the past month, hitting multiple 52‑week highs as silver prices rallied sharply. With silver trading at $72/oz, more than double its H1FY26 average, HZL’s earnings outlook has brightened significantly. While production challenges persist, strong realizations, cost efficiencies, and rising renewable energy adoption are expected to support robust cash flows and returns. Global silver demand from renewables, EVs, and electronics has created a supply deficit for the fifth consecutive year. Silver prices at $72/oz are 1.4x FY25 averages. Every $1/oz increase adds ~1% to HZL’s EBITDA. Silver contributed 41% of EBIT in H1FY26, up from 28% in FY23, and is projected to reach 45% by FY27. Zinc prices rebounded to $3,400/tonne in December, 35% above April lows, driven by inventory declines. Prices remain above FY25 averages. A $100/tonne increase boosts EBITDA by ~4%, adding another lever to earnings growth. HZL trimmed FY26 guidance: - 1.075 mt metals output, up just 2% YoY. - 680 tonnes silver, down 1% YoY. H1FY26 saw a 5% decline in metals output and 16% drop in silver production, highlighting operational constraints. Despite modest volume growth, Jefferies India projects EPS growth of 22% in FY26, 29% in FY27, and 7% in FY28. Free cash flows are estimated at ₹8,000–14,800 crore annually, with ROE of 69–85% over FY26–28. EPS forecasts are 9–31% above Street estimates, reflecting optimism on realizations and margins. Cost of production fell to $1,002/tonne in H1FY26, down 8% YoY and 20% below FY23 peaks. Rising renewable energy adoption (target 55% by FY27, 70% by FY28) is expected to lower costs further. At 12x FY27e EV/EBITDA, valuations appear demanding, but firm silver prices and strong cash flows sustain investor interest.