Dolat Capital sets Rs 564 as target price for Hindustan Zinc, 'buy' rating

Domestic brokerage expects company to gain from cost control and base metal expansion

Domestic brokerage Dolat Capital has set a target price (TP) for Rs 564 on Hindustan Zinc, implying an upside of 28 per cent from current levels. Hindustan Zinc shares last traded a per cent higher at Rs 440. The stock has seen a spurt in trading volumes in the past two or three sessions.

 

“We initiate coverage on Hindustan Zinc with a 'buy’ rating and TP of Rs 564, valuing at 10x FY27E EV/EBITDA,” said the brokerage in a note.

 

“The company’s long-term intent is to expand its base metal production capacity to 2,000 ktpa (plus increase its silver production capacity from 800 tpa to 1,500 tpa by FY30) and reduce zinc production costs (ex-royalty) below $1,000 per tonnes, to further support profitability. We expect revenue/ ebitda/ PAT CAGR of 4/8.4/7% over FY25-27E,” it said. (Ktpa: kilotonnes per annum)

 

 

 

Hindustan Zinc has a 77 per cent market share in India’s primary zinc market. Its mined metal has grown at a CAGR (compound annual growth rate) of 4 per cent from 917 KT in FY20 to 1,095 KT in FY25. The company’s silver production has grown more than 20-fold in the last two decades: from 35 tonnes in FY04 to 687 tons in FY25. Silver’s share in the company's operating profit is around 35-40 per cent.

 

“With 70-80 per cent market share in the Indian zinc market, Hindustan Zinc is well-positioned to capitalise on these trends and drive top-line growth. Hindustan Zinc is a pure play on its operational efficiency, strong R&R base, capacity expansion and cost optimisation initiative,” said Dolat Capital.

 

Indsec Research and Yes Securities too have initiated coverage on Hindustan Zinc with a ‘buy’ rating and a target price of Rs. 554 and Rs 585, respectively.

 

Shares of Hindustan Zinc are down about a per cent year to date, underperforming the Nifty which is up about 5 per cent.