B&K backs Hindustan Zinc on low-cost operations, silver-driven earnings

B&K Securities has initiated coverage on Hindustan Zinc (HZL) stock with a Buy rating, citing the Vedanta group company’s strong cost efficiency, rising metal volumes and increasing earnings contribution from silver.

 

Hindustan Zinc (HZL), the brokerage believes, continues to strengthen its position as one of the lowest-cost zinc producers globally, consistently operating in the first decile of the global zinc mining cost curve.

 

“Supported by structurally superior assets, high-grade ore bodies and fully integrated mine-to-metal operations, the company has maintained a cost trajectory historically well below global peers,” the brokerage said in its report.

 

The firm has set a target price of ₹610 for HZL, valuing the zinc and lead businesses at 9x EV/Ebitda and the silver segment at 15x EV/Ebitda on FY28E estimates. This implies a 22.5 per cent upside from current market levels, based on its base-case metal price assumptions of ₹3,000/2,050 per tonne and $44 per ounce for zinc/lead/silver. The stock is currently trading at 9x FY28E Ebitda.  ALSO READ | Swiggy shares rise 3% after shareholders approve ₹10,000-crore QIP

Meanwhile, here are top rationale behind the coverage:

Industry-leading cost structure

According to B&K Securities, HZL’s zinc production cost of $994 per tonne in 2QFY26 places it among the lowest-cost producers globally. This is roughly 30 per cent below the peer average of $1,300 to $1,400 per tonne.

Major capacity expansion under ‘Hindustan Zinc 2.0’

In June 2025, the company’s board approved Phase I of a large-scale expansion plan that aims to double integrated refined metal capacity from about 1.2 mtpa to 2.0 mtpa over the next five years. The project is expected to require capital expenditure of ₹25,000 crore to ₹30,000 crore.

Silver upside as a key earnings lever

HZL’s silver output of around 700 tpa is set to rise to 1,500 tpa after the expansion, offering significant leverage to a structurally bullish silver market, the brokerage noted. With silver prices expected to remain above $50 per ounce through the remainder of FY26, and with silver directly contributing to Ebitda, its share of Ebitda is projected to increase to 42 per cent in FY27 compared with 28 per cent in FY25.   ALSO READ | Delhivery rises 4% on rolling out 'Delhivery International' for Indian MSME 

The company has hedged 120 tonnes of silver at $37 per ounce for the second half of the year, while the remaining 280 tonnes of planned production will be sold at spot prices.

Forward integration through DPI/NPK fertiliser plant

The brokerage said HZL expects to add ₹4 billion to annual Ebitda through this initiative, supported by greater value chain integration, particularly in sulphuric acid.

De-bottlenecking measures to aid near-term growth

According to the brokerage, the near-term production is expected to get a boost from the 160 ktpa Debari Roaster, cell-house de-bottlenecking at the Dariba Smelting Complex, and capacity improvements at the Chanderiya Lead–Zinc Smelter. All these upgrades are scheduled for completion within FY26.

 

(Disclaimer: View and outlook shared on the stock belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers discretion is advised.)