Jefferies prefers Hindustan Zinc over Hindalco in its latest metals and mining report, citing a more favourable earnings outlook for zinc and silver than aluminium. The brokerage retained its ‘Buy’ rating on Hindustan Zinc and a ‘Hold’ rating on Hindalco, saying recent metal price movements were likely to support the former while putting pressure on the latter.

The brokerage’s preference was also supported by its earnings revisions. Jefferies raised its FY27-FY29 earnings estimates for Hindustan Zinc, while lowering its estimates for Hindalco. It also pointed to differences in the two companies’ expected cash positions and valuations.

The report said zinc prices had gained from supply constraints, while silver had recovered after its earlier decline. Aluminium prices, meanwhile, had fallen from their recent highs, with Jefferies seeing the possibility of improved supply in the coming months.

Jefferies on Hindustan Zinc vs Hindalco 

Jefferies said the recent divergence in metal prices had favourable earnings implications for Hindustan Zinc while weighing on Hindalco Industries. Spot zinc was 15% above the June-quarter average, while silver had recovered 23% from its July low. Aluminium was 10% below its June-quarter average, according to the brokerage.

The brokerage said zinc prices had risen 31% since March to $3,966 per tonne, driven by declining mine output, operational disruptions and limited project development outside China. It also noted that the International Lead and Zinc Study Group had revised its 2026 global zinc market forecast to a 19,000-tonne deficit, compared with an earlier forecast of a 271,000-tonne surplus.

Jefferies said silver had recovered 23% to $68 per ounce after falling 37% between May and July. Its global commodities team remained constructive on precious metals, while the brokerage raised its FY27-FY28 silver price assumptions to $60-$63 per ounce. For aluminium, it lowered its FY27-FY28 assumptions to $3,300-$3,325 per tonne.

“Zinc and Silver Shining Brighter than Aluminum,” Jefferies said in the title of its report. The brokerage said the metal price movements had created a more favourable earnings setup for Hindustan Zinc than Hindalco.

Jefferies on Hindustan Zinc: ‘Buy’

Jefferies reiterated its ‘Buy’ rating on Hindustan Zinc and raised its target price to Rs 750 from Rs 660. Its base case indicated about 27% price upside, while total shareholder return was estimated at 31%, including a 4% dividend yield.

The brokerage raised its FY27-FY29 EPS estimates for Hindustan Zinc by 10% to 11%. Jefferies said its estimates were now 16% to 23% above consensus. It added that if zinc and silver prices remained at spot levels, FY28 EPS could receive a further potential upgrade of 12%.

Jefferies expected Hindustan Zinc’s EBITDA to rise to Rs 31,800 crore in FY27, Rs 32,900 crore in FY28 and Rs 34,500 crore in FY29. Its EPS estimates stood at Rs 51, Rs 53, and Rs 56, respectively. The brokerage also expected the company’s net cash position to increase from Rs 5,230 crore in FY26 to Rs 22,700 crore by FY29.

“HZ is the world’s largest integrated zinc producer and among the top-10 silver producers,” Jefferies said. The brokerage also said Hindustan Zinc was among the lowest-cost zinc producers globally, placing it in the first decile of the global zinc mining cost curve.

Jefferies on Hindalco: ‘Hold’

Jefferies retained its ‘Hold’ rating on Hindalco and raised its target price to Rs 1,140 from Rs 1,100. Its base case indicated about 9% upside.

The brokerage cut its FY27-FY29 EPS estimates for Hindalco by 2% to 3%. Its revised aluminium price assumptions stood at $3,325 per tonne for FY27, $3,300 for FY28 and $3,325 for FY29. Jefferies had previously estimated prices of $3,370, $3,400 and $3,425, respectively.

Jefferies expected Hindalco’s EBITDA to reach Rs 48,500 crore in FY27, Rs 51,900 crore in FY28 and Rs 57,600 crore in FY29. Its EPS estimates stood at Rs 120, Rs 122 and Rs 135, respectively. The brokerage said Hindalco’s net debt had risen 74% in FY26 and expected a further 13% year-on-year increase in FY27, driven by ongoing capital expenditure at Novelis and elevated working capital.

“India aluminum business profitability to moderate on lower aluminum prices,” Jefferies said in its investment thesis. The brokerage also noted that Hindalco’s valuation was 1.3 times one-year forward price-to-book for an expected 15% to 18% return on equity, compared with its long-term average of 0.9 times price-to-book for an 11% return on equity.

What could drive the two stocks next

For Hindustan Zinc, Jefferies listed consensus earnings upgrades and better-than-expected mine grades as positive catalysts. The brokerage identified lower zinc or silver prices, worsening metal grades, mine renewals after 2030 and any adverse related-party event as risks to its view.

For Hindalco, higher aluminium prices and improved Novelis margins were identified as positive factors. Lower aluminium prices were listed as a key downside risk.

Jefferies expected Hindalco’s Novelis EBITDA per tonne to be between $525 and $544 during FY27-FY29. It also expected Novelis volumes to increase from 3.74 million tonnes in FY27 to 4.50 million tonnes by FY29.

For Hindustan Zinc, the brokerage expected refined metal sales of 1.074 million tonnes in FY27, 1.090 million tonnes in FY28 and 1.107 million tonnes in FY29. Silver sales were expected at 645 tonnes, 654 tonnes and 664 tonnes, respectively.

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Why Jefferies prefers Hindustan Zinc

The difference in Jefferies’ ratings came primarily from the earnings outlook it saw for the two companies. Higher zinc and silver prices supported its estimates for Hindustan Zinc, while lower aluminium price assumptions led to cuts in its Hindalco forecasts.

The brokerage also expected Hindustan Zinc’s cash position to improve over the next few years. Hindalco, in contrast, was expected to see another increase in net debt during FY27 before its debt position started to ease from FY28.

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Jefferies also considered Hindustan Zinc’s valuation reasonable. The stock traded at 7.5 times one-year forward EV/EBITDA on its estimates, slightly below its 10-year average of 7.8 times. Hindalco’s 6.2 times one-year forward EV/EBITDA valuation was broadly in line with its historical average.

“Prefer HZ over HNDL,” Jefferies said in its report. The brokerage therefore retained a ‘Buy’ rating on Hindustan Zinc while keeping Hindalco at ‘Hold’.

Conclusion

Jefferies’ latest comparison gives Hindustan Zinc the stronger position among the two metal stocks. The brokerage’s assessment rests on a more supportive outlook for the metals that contribute  to earnings, along with expectations of stronger financial performance.

Disclaimer: The views, ratings, target prices, estimates, projections and other opinions mentioned in this article are those of Jefferies, as stated in its research report, and do not represent the views of Financial Express or its editorial team. This article is for informational purposes only and should not be treated as investment advice or a recommendation to buy or sell any security. Readers should conduct their own research and consider their financial position and risk appetite before making any investment decision. They are advised to consult a SEBI-registered investment adviser or another qualified financial professional before investing in securities. Investments in the securities market are subject to market risks, and past performance or brokerage estimates should not be treated as a guarantee of future returns.