HZL, Vedanta share price rally reflects earnings upgrade potential, says Emkay

Multibagger stocks: Emkay Global in a fresh note said the recent rally in Hindustan Zinc (HZL) and Vedanta shares reflected growing earnings upgrade potential, driven by strong medium-term visibility, cost advantages and rising exposure to silver prices. HZL shares have surged 147 per cent so far this year, while Vedanta has rallied 131 per cent over the same period.

The domestic brokerage said it had visited Hindustan Zinc’s Rampura Agucha mine and met the management, which reiterated confidence in earnings visibility, supported by a secure mine life, high structural entry barriers and renewables-led cost tailwinds. Hindustan Zinc accounted for about 40 per cent of Vedanta’s consolidated Ebitda, Emkay Global noted.

The company management guided for FY27 zinc output of at least 1,080 kilo tonnes and silver production of around 700 tonnes, positioning the company in the first quartile of the global zinc cost curve. Emkay noted that minimal hedging planned for FY27 reflected management’s conviction on structural tightness in silver supply, leaving room for price-led earnings upside.

At spot prices, Emkay estimated Hindustan Zinc’s Ebitda at Rs 25,800 crore, compared with consensus estimates of about Rs 22,000 crore, implying an upgrade potential of nearly 17 per cent. The brokerage said every $1 per ounce move in silver prices could change Ebitda by around 1 per cent, underscoring the operating leverage to precious metals.

Emkay said the management commentary on mine retention remained constructive, with Sindesar Khurd valid through 2049 and Rampura Agucha till 2030. For mines due for re-auction in 2030, Hindustan Zinc retained the right of first refusal, which, along with integrated operations and reserve development capabilities, improved the probability of retention, albeit at moderately higher royalties.

The brokerage highlighted energy transition as a key structural cost lever, with renewable energy penetration targeted to rise from 7 per cent in FY25 to 55 per cent by FY27 and 70 per cent by FY28. Each 2 per cent increase in renewable usage could deliver cost savings of about $1 per tonne, helping offset mining cost inflation as operations deepen.

Emkay also pointed to limited silver hedging, with only 123 tonnes hedged for the second half of FY26 at $37 per ounce and minimal coverage for FY27. This, it said, reinforced the view that Hindustan Zinc offered one of the cleanest ways to play silver price strength in India, and that the recent run-up in Hindustan Zinc and Vedanta shares reflected the market pricing in earnings upgrades.