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Hindustan Zinc Ltd’s (HZL) earnings are benefiting from three key factors: higher metal prices, lower cost of production (CoP) and improved volumes.
The September quarter (Q2FY27) results were strong, with year-on-year growth in revenue and earnings similar to Q1. Q2’s consolidated revenue rose a whopping 77% year-on-year to ₹15,100 crore. Operating leverage and a sharp drop in production cost meant Ebitda grew 108% to ₹9,250 crore.
Silver prices on LBMA averaged $62.6 per ounce (oz) in Q2, up nearly 60% year-on-year. Sales volumes rose 24% to 183 tonnes, including 10 tonnes in lead concentrate, following capacity augmentation through debottlenecking projects completed in H2FY26. H1 production of 340 tonnes was in line with FY27 guidance of 680 tonnes. However, the benefit from higher realizations could moderate from Q3FY27, with silver prices declining to around $58 per oz currently, close to the Q3FY26 average of $54.7 per oz.
Zinc prices also rose sharply, averaging $3,825 per tonne on the London Metal Exchange in Q2FY27, up 35% year-on-year. The market is seeing a sharp demand-supply mismatch, driven by mine closures and inadequate fresh investment. Prices have since fallen from a mid-September peak of about $4,200 per tonne to around $3,740 per tonne, which could limit the upside in Q3FY27.
Cost savings have also fuelled earnings. HZL’s zinc CoP, excluding royalty, fell 29% year-on-year to $703 per tonne in Q2 and to $776 per tonne in H1, aided by higher prices for the key by-product sulphuric acid and an increased share of renewable energy. Disruption in sulphur supplies amid the West Asia war has lifted sulphuric acid prices. Thus, the management has lowered its FY27 CoP guidance to $825-850 per tonne from $975-1,000 per tonne earlier.
Sales volumes of refined metals, comprising zinc and lead, increased 8% to 0.26 million tonnes (mt) last quarter. The management maintained its production guidance of 1.1 mt in FY27, about 5% higher than FY26.
Systematix Shares and Stocks (India) has raised its HZL FY27 and FY28 Ebitda estimates by 23% and 9%, respectively, reflecting stronger H1FY27 performance, lower CoP assumptions and higher zinc prices. The broking firm notes that zinc and silver prices could remain volatile in the near term amid geopolitical developments, energy costs and currency movements.
Declining silver prices have weighed on the HZL stock, taking it down about 10% so far this year. In the absence of any new capacity coming online until FY29, the trend in zinc, silver and sulphuric acid prices would remain key triggers for the stock.
Ashish Agrawal has been associated with Mint for the last two years and writes for the ‘Mark to Market’ column. He has done his master’s in business administration from IIM Calcutta, specialising in finance and operations. His previous experience includes stints with The Economic Times and JSW Steel, among others. He has over 15 years of experience in stock market research, analysis and writing, and has covered sectors such as metals and mining, oil and gas, power (including renewables), capital goods (including electronics).<br><br>Ashish is passionate about infrastructure sectors, which, he believes, are the strands that lift the entire economy. He was invited for a visit to France, by the Government of France, in recognition of his coverage of issues related to nuclear power. Besides, Ashish has considerable understanding of the Indian and global economy and is the author of a book, “Indian Economy & Business: Overview of Recent Trends & Events”. As a part of the enterprise risk management team at JSW Steel, he had conceptualised, proposed and developed a Risk Index for the enterprise to quantify and monitor all the risk factors, and take mitigating action as needed.
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