Hindustan Zinc needs timely expansions to refuel volume growth
Summary
Hindustan Zinc Q4FY25 results may have exceeded expectations, but the outlook is hardly encouraging. The company’s growth trajectory appears to be fully priced in, and now hinges on meaningful volume additions
Hindustan Zinc Ltd's(HZL) muted FY26 guidance overshadowed its robust March quarter result (Q4FY25). It beat consensus estimates on select parameters with consolidated revenue at a multi-quarter high of ₹9,087 crore, rising 20% year-on-year.
Ebitda increased 32% year-on-year to ₹4,800 crore aided by higher zinc and silver prices, softer input costs and higher byproduct sales. Ebitda rose 28% to ₹17,500 crore and revenue increased 18% to ₹34,000 crore in FY25. But the outlook is hardly encouraging.
HZL has guided formined metal and refined metal production volumes of1.125 mtand1.1 mtfor FY26 which is barely an increase of 2.7% and4.6% respectively, over FY25 when production was the highest ever. Also, the volume guidance for silver at around 705 tonnes is only 2.7% higher year-on-year, and substantially lower than peak of 746 tonnes in FY24.
Cost of production (CoP) for zinc (excluding royalty) in Q4FY25 hit a 16-quarter low of$994 per tonne, down 5.4% year-on-year.But this could well be a one-off as CoP is seen hovering at $1,025- $1,050 per tonne, similar to levels seen in FY25.
Zinc prices could remain at nearly the same level in FY26 as FY25 backed by strong domestic demand with market balance expected to be in surplus in CY25. Silver prices are expected to increase to $37-$38 per ounce, from $30.4 in FY25.
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A worry is that tariff-led uncertainty would persist at least in the first half of FY26, keeping commodity prices volatile.“In-line with management guidance and given the current spot metal prices, we revise our silver output assumption downward by 13.4%/ 11.8% and lead prices downward by 4.8% resulting in a decrease in FY26/ 27 Ebitda by 1.8%/ 2.2%," said Antique Stock Broking Ltd report dated 28 April. Zinc and silver accounted for 64% and 18% of FY25 revenue.
Further, HZL's long-term expansion plans are facing hiccups with the first phase expected only in FY28; the near-term projects alsosee some delays. Commissioning of the Debariroaster plant, an intermediate stage for converting zinc ore into metal, is expectedby mid-Q1FY26 against the earlierschedule of February. The smelter debottlenecking initiatives at Dariba and Chanderiya are expected to be completed by Q2 and Q3 of FY26, respectively.
Meanwhile, the stock performance has been lacklustre. Shares have risen a mere 4% in the last one year,trading at an enterprise value of 10x FY26 estimated Ebitda, showed Bloomberg data, against 10-year average of 7.9x.
A Systematix Shares and Stocks (India) report dated 27 April points out that the company’s growth trajectory appears to be fully priced in, and now hinges on meaningful volume additions from new expansions and timely completion of projects.
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