The silver prices have been on fore in 2025, and the impact is also seen in stocks that are a play on this crucial industrial as well as precious metal have also been in focus. Hindustan Zinc is one such stock. Jefferies has initiated coverage on it with a ‘Buy’ rating and a target of Rs This implies a return of nearly 18% from current levels.
According to Jefferies, Hindustan Zinc stands to gain from higher silver and zinc prices, supported by its position among the lowest-cost producers globally and a strong earnings outlook over the next few years.
Jefferies on Hindustan Zinc: Buy rating supported by valuation and scenario analysis
Jefferies has valued Hindustan Zinc at 10 times the September 2027 estimated EV/EBITDA to arrive at its base target price of Rs 660. The brokerage has also outlined an upside scenario target of Rs 740, based on an 11 times EV/EBITDA multiple, assuming higher commodity prices.
In the downside case, Jefferies places the stock at Rs 470, using an 8 times EV/EBITDA multiple. The brokerage said its base-case valuation of 9.2 times FY27 EV/EBITDA is higher than the company’s 10-year average of 7.3 times, but believes this is supported by a higher share of silver in earnings.
Jefferies on Hindustan Zinc: Exposure to rising silver and zinc prices
Jefferies said a key driver of its positive view is Hindustan Zinc’s exposure to silver and zinc.
Silver prices have doubled in 2025 to around $62 per troy ounce. Jefferies expects the global silver market to remain in deficit for the fifth year in a row. Hindustan Zinc is among the top five silver producers globally, with a capacity of about 800 tonnes.
Silver accounted for 38% of the company’s EBIT in FY25, and Jefferies expects this to rise to 44% by FY27. The brokerage noted that the full benefit of higher silver prices will flow into earnings from FY27, as around 37% of 2HFY26 silver volumes were hedged at lower prices.
On zinc, Jefferies pointed out that global prices have risen about 33% since April 2025, supported by low inventories. While industry data points to a refined zinc surplus in the near term, the brokerage expects higher zinc prices to support earnings from FY27 onward due to existing hedges on near-term volumes.
Jefferies on Hindustan Zinc: Earnings growth and returns remain strong
Jefferies expects Hindustan Zinc to post strong earnings growth over the next two years. The brokerage forecasts EPS growth of 22% in FY26 and 29% in FY27, before moderating to 7% in FY28.
Jefferies also said its EPS estimates for FY26 to FY28 are 9% to 31% higher than consensus. The company’s cash generation remains strong, with free cash flow averaging Rs 105 billion over FY21 to FY25 and expected to range between Rs 80 billion and Rs 148 billion annually over FY26 to FY28.
Return on equity is expected at about 85% in FY26 and FY27, easing to 69% in FY28. Jefferies added that the company’s balance sheet remains healthy, with FY25 net debt to EBITDA at just 0.1 times, supporting its dividend payouts.
Jefferies on Hindustan Zinc: Cost position supports margins
Jefferies said Hindustan Zinc remains among the lowest-cost producers globally. The company sits in the first decile of the global zinc mining cost curve and the first quartile of the smelting cost curve.
The cost of Zinc production, excluding royalty, has declined from a peak of $1,257 per tonne in FY23 to about $1,002 per tonne in the first half of FY26. Jefferies expects costs to remain near $1,000 per tonne over the next few years, supported by operating efficiency and higher volumes.
The brokerage also noted that the share of renewable energy in the company’s power mix rose to 13% in FY25 and is targeted to reach 70% by FY28. The company estimates that every 2% increase in renewable energy usage can reduce power costs by $1 to $1.5 per tonne.
Jefferies on Hindustan Zinc: Capacity additions and domestic position
Jefferies said near-term volume growth is likely to remain modest due to project timelines, but medium-term plans support growth.
Hindustan Zinc is increasing refined metal capacity by 34% to about 1.5 million tonnes per annum and silver capacity to around 830 tonnes per annum by the second quarter of FY29. The company is also targeting refined metal output of 2 million tonnes and silver output of 1,500 tonnes by 2030.
Jefferies added that the company plans to raise the share of value-added products from 22% of sales in FY25 to 50% by FY30. It is also setting up a fertiliser plant using sulphuric acid, which could add incremental EBITDA once fully operational.
The brokerage said Hindustan Zinc remains well placed in the domestic market, with a 77% share of India’s primary zinc market and its position as the country’s only primary silver producer.
Jefferies on Hindustan Zinc: Risks to the investment case
Jefferies said risks include lower silver and zinc prices, weaker ore grades, the need for mine renewals after 2030, and any adverse developments linked to related-party transactions, including possible increases in brand fees paid to promoter Vedanta.