Silver upside, cost edge drive earnings upgrade case for Vedanta: Emkay

Vedanta share: At current spot prices, Emkay estimates FY27 Ebitda of about ₹25,800 cr, compared with consensus estimates of ₹22,000 cr, implying an upgrade potential of roughly 17 per cent.

Analysts at Emkay Global Financial Services (Emkay) see major earnings upgrade potential for Vedanta, driven by strong medium-term visibility at Hindustan Zinc (HZ), which contributes about 40 per cent to Vedanta’s consolidated earnings before interest, tax, depreciation and amortisation (Ebitda). 

 

Following a site visit to HZ’s Rampura Agucha (RA) mine and management interactions, analysts said the outlook is supported by a secure mine life, high structural entry barriers and a renewables-led cost tailwind, alongside rising leverage to silver prices.

 

Management guided for FY27 zinc output of at least 1,080 kilo tonnes and silver production of around 700 tonnes, positioning HZ firmly in the first quartile of the global zinc cost curve. 

 

 

At current spot prices, Emkay estimates FY27 Ebitda of about ₹25,800 crore, compared with consensus estimates of ₹22,000 crore, implying an upgrade potential of roughly 17 per cent. 

 

Emkay, meanwhile, maintains its ‘Buy’ rating on Vedanta, with a target price of ₹625 per share.

 

The brokerage believes silver exposure remains underappreciated, with the recent rally in HZ and Vedanta shares reflecting expectations of earnings upgrades.

 

According to analysts, a key pillar of confidence is the security of mine life. Sindesar Khurd (SK) is valid through CY49, while RA is operational until CY30. Notably, for the RA mines that are due for re-auction in CY30, HZ retains the right of first refusal. Management highlighted strong operational moats, including the complexity of reserve development and the benefits of integrated smelting, which create high entry barriers for new players and support a high probability of mine retention, albeit potentially at moderately higher royalties.  CATCH STOCK MARKET LIVE UPDATES TODAY

 

Cost competitiveness remains another major strength, analysts highlighted. Mining costs at RA are estimated at $580-590 per tonne, while SK operates at $400-500 per tonne. Smelting costs are guided at $350-360 per tonne, translating into a company-level unit cost of around $1,000 per tonne, keeping HZ among the most competitive global zinc producers.

 

The transition to renewable energy is emerging as a structural cost lever. Management aims to increase renewables penetration from 7 per cent in FY25 to 55 per cent in FY27 and further to 70 per cent by FY28. Every 2 per cent increase in the renewables mix is expected to yield cost savings of about $1 per tonne, helping offset inflationary pressures as mining operations go deeper.

 

On pricing, Emkay highlighted management’s strong conviction on silver. Silver hedging is limited to 123 tonnes, covering about 34 per cent of H2FY26 volumes at $37 per ounce, while FY27 hedging remains minimal. This reflects confidence in structural tightness in the silver market and supports a price-led earnings upside. Each $1 per ounce movement in silver prices impacts HZ’s Ebitda by about 1 per cent, while a $100 per tonne change in zinc prices results in a 2.5 per cent Ebitda sensitivity.

 

At spot zinc prices of $3,025 per tonne and silver prices of $65 per ounce, Emkay believes consensus estimates are likely to move higher, reinforcing its view that HZ offers the cleanest silver price exposure in India and that Vedanta stands to benefit meaningfully from this upside.

 

On the bourses, Vedanta share price rose up to 1.39 per cent to an intraday high of ₹577.95 per share. Around 11:30 AM, Vedanta share price was trading 1.33 per cent higher at ₹577.60 per share. By comparison, BSE Sensex was trading flat with marginal gains at 84,611.38 levels.   

Disclaimer: The stock target and outlook has been suggested by Emkay. Views expressed are their own.