Hindustan Zinc share price targets: Stock valuations rich, wait for better entry levels, say analysts

Vedanta-promoted Hindustan Zinc Ltd (HZL) reported a weak set of March quarter numbers, which were largely in line with Street expectations. A couple of brokerages have upped their Ebitda estimates for FY25 and FY26 on capacity addition but felt the stock is factoring in all positives post the recent run and that one should wait for better entry levels.

For the quarter, Hindustan Zinc’s revenue fell 11.3 per cent YoY but rose 3.3 per cent sequentially aided by higher zinc volumes, partly offset by lower lead, silver volumes, and lower metal prices. Profit fell 21 per cent YoY but was flat sequentially.

Nuvama said it has upgraded FY25 and FY26 Ebitda estimates for HZL by 21 per cent and 20 per cent, respectively, factoring in higher zinc and silver prices. The estimate assumes higher zinc volume, partly offset by lower silver and lead volumes.

"HZ will soon enter into the growth phase as it is working to increase refined metal capacity to up to 2mtpa from 1.12mtpa. We raise EV/EBITDA multiple to 7 times (6.5 times earlier) lifting the target to Rs 340 (earlier Rs 257). However, as the stock has run up by ~37 per cent in the last month, we reiterate ‘REDUCE’ on valuation," the brokerage said.

Antique Stock Broking said the commencement of Bamnia Kalan mine and 160 ktpa Debari roaster would aid in raising the metal concentrate capacity to 2 mtpa while de-bottlenecking initiatives would raise refined metal capacity to 1.2 mtpa by FY26.

"Product portfolio improvement (alloy plant and fertilizer plant) could support improved margins. We factor in improved zinc (higher by 6 per cent) and silver pricing (higher by 8 per cent) outlook, leading to 5 per cent/ 7 per cent rise in FY25/ 26 EBITDA. We revise our target price to Rs 341 (earlier Rs 297) at a higher target multiple of 6.5 ties FY26E EV/ Ebidta (earlier 6 times), in line with global peers," it said.

That said Antique maintained its 'HOLD' rating as it felt valuations are rich. The boking firm said it would prefer attractive entry levels.

Motilal Oswal said the Q4 performance of Hindustan Zinc was largely in line with its estimates. HZL continues to focus on improving production with tight cost control, it said. 

"To account for lower CoP ahead and an improved demand outlook, we have increased our FY25/FY26 Ebitda estimates by 11 per cent/10 per cent. HZL currently trades at 7 times FY26E EV/Ebitda and we believe all positive factors are priced in at the current levels. We reiterate our Neutral rating on the stock with a revised target price of Rs 370 (premised on 6.5x FY26E EV/Ebitda)," Motilal Oswal said.