Motilal Oswal has maintained ‘Neutral’ rating on Hindustan Zinc with a target price of Rs 480. This is very close to the current market price of Rs 486. The brokerage said that the current valuation of Hindustan Zinc has already priced in all the positive factors.
The factors like expansion plan that aim to double capacity, and it focus on improving production with tight cost control measures, supported by favourable pricing conditions that are likely to enhance margins are to be fully reflected in the share price.
The company’s board approved a growth capex of Rs 12,000 crore – plans to fund through internal accruals and debt – to expand the zinc smelting capacity by 250 ktpa (thousand tonnes per annum) at Debari. Along with an increase in smelting capacity, it plans to expand the mine’s capacity of 330 ktpa.
“The expansion plans are in line with the company’s long-term target to double its capacity. It continues to focus on improving production with tight cost control measures,” said Motilal Oswal.
Motilal Oswal on Hindustan Zinc: Cost of production competitive
Hindustan Zinc’s management has guided for the Cost of Production (CoP) to remain competitive at $1,025-1,050/tonne. Also, the company expects revenue to rise from Rs 34,100 crore in FY25 to Rs 40,000-42,000 crore with the ramp-up of phase-I expansion, and further to Rs 62,000-65,000 crore upon the completion of the expansion plan.
Motilal Oswal said that EBITDA is expected to increase from Rs 174,00 crore in FY25 to Rs 21,000-22,000 crore post the phase-I expansion, and further to Rs 34,000-36,000 crore after the phase-II expansion, considering the price of zinc on London Metal Exchange (LME) prices and exchange rates remain constant.
“We retain our earnings estimates for FY26-27 and expect Hindustan Zinc to maintain its focus on profitability. Additionally, the favorable pricing condition is likely to further support margins,” said Motilal Oswal.
Hindustan Zinc share price
Hindustan Zinc’s share price fell almost 6% in Wednesday’s trade after the promoters have reportedly sold shares worth Rs 7,500 crore in a block deal, reported CNBC-TV8. The shares were sold at a 10% discount to the June 17 closing price, as per the report.