Hindustan Zinc, Vedanta up 3% each; Emkay attributes surge to silver prices

The brokerage believes Hindustan Zinc/Vedanta's exposure to silver is underpriced, as the consensus expectations trail the strong move in silver in recent months

Hindustan Zinc and Vedanta shares rose 3 per cent on BSE, logging an intra-day high at ₹481.25 per share and ₹464.9, respectively. At 12 PM, Hindustan Zinc’s share price was trading 2.92 per cent higher at ₹480.15 per share, and Vedanta’s share price was trading 2.6 per cent higher at ₹463.9 per share on BSE. In comparison, the BSE Sensex was down 0.03 per cent at 80,337.94.

 

Domestic brokerage Emkay Global Financial believes that Hindustan Zinc is the key beneficiary of the uptrend in silver prices, which are up 63 per cent year-to-date (Y-T-D). It sees a strong potential for Hindustan Zinc to be repriced higher to reflect current prices.

 

“Global peers like Fresnillo and Grupo Mexico have already re-rated Y-T-D, and we therefore see a strong potential for Hindustan Zinc to be repriced higher, to reflect current prices; this inherently benefits Vedanta,” Emkay said. 

 

The brokerage further believes Hindustan Zinc/Vedanta’s exposure to silver is underpriced, as the consensus expectations trail the strong move in silver in recent months, with the metal now trading at $47/oz, as against $34/oz in Q1FY26 and $30/oz in FY25.

 

Hindustan Zinc contributes 40 per cent to Vendanta’s Ebitda and is the core part of the group portfolio. Thus, the brokerage has retained ‘Buy’ on Vedanta, with an unchanged target of ₹525. Hindustan Zinc, on the other hand, is not rated at Emkay Global. 

 

Silver prices are witnessing a strong uptrend on the back of a structural supply/demand deficit, with an annual supply of 1 billion oz, while demand is estimated at 1.1 billion oz, with a global cyclical recovery alongside a weak dollar index acting as a tailwind.

 

According to brokerage calculations, $1/oz move in silver prices has 1 per cent sensitivity to Hindustan Zinc’s Earnings before interest, tax, depreciation, and amortisation (Ebitda). 

 

Silver is a by-product of zinc, which implies that 88 per cent of silver revenue is a direct pass-through to Ebitda as the cost of production remains tied to zinc production. Silver contributes 20-25 per cent of Hindustan Zinc’s revenue profile; the contribution at the Ebitda level is 35-40 per cent.  

 

In FY25, Hindustan Zinc delivered Ebitda of ₹17,400 crore, generating an Ebitda margin of 53 per cent. Emkay Global expects the company to generate Ebitda of ₹22,000 crore with a 57 per cent margin in FY27E, if spot prices of zinc and silver are upheld.