Shares of Hindustan Zinc Ltd (HZL) are witnessing a spectacular rally, climbing nearly 38% over the past month, fueled by a powerful surge in global silver prices. The stock has achieved a new 52-week high in eight out of the last nine trading sessions on the National Stock Exchange, with trading volumes in December soaring to nearly four times the levels seen in November.
The Structural Shift Driving Silver's Surge
The global silver market is experiencing a fundamental transformation. Rising demand from key sectors like renewable energy, electric vehicles, and electronics has pushed the market into a supply deficit for the fifth year in a row in 2025. This persistent mismatch between demand and supply is underpinning strong prices.
Currently, silver is trading around $72 per ounce, a figure that is almost double the H1FY26 average of $36.6 per ounce and 1.4 times the FY25 average of $30.4 per ounce. This dramatic price increase is directly brightening the financial prospects for Hindustan Zinc, a major producer.
Direct Impact on HZL's Financial Health
The correlation between silver prices and HZL's profitability is stark. Analysts note that every $1 per ounce increase in silver prices lifts the company's EBITDA by approximately 1%. The importance of silver to HZL's bottom line has grown significantly; it contributed 41% to the company's Earnings Before Interest and Taxes (EBIT) in H1FY26, a substantial jump from around 28% in FY23. This share is projected to rise further to 45% by FY27.
"We believe HZL provides the cleanest exposure to play silver price strength in India," stated Emkay Global Financial Services in a report dated 17 December.
Zinc, HZL's other key metal, has also seen firming prices. After a slight dip in H1FY26, prices on the London Metal Exchange rose to nearly $3,400 per tonne in mid-December—about 35% higher than April lows—driven by shrinking inventories. While prices have moderated since, they remain above the FY25 average. A $100 per tonne increase in zinc prices boosts HZL's EBITDA by roughly 4%.
Production Hurdles and Robust Earnings Forecast
Despite the favorable price environment, HZL faces operational headwinds. The company has revised its FY26 production guidance downwards due to challenges in ramping up output. It now expects to produce 1.075 million tonnes of combined zinc and lead, only 2% higher than FY25, and 680 tonnes of silver, which is 1% lower than the previous year. In H1FY26, metals output fell by 5%, with silver production declining a sharper 16%.
Nevertheless, analysts remain bullish on earnings growth. Jefferies India expects strong earnings per share (EPS) growth of 22% in FY26 and 29% in FY27, followed by 7% in FY28, supported by robust cash flows and high return on equity (ROE). "Our FY26-28 estimated EPS are 9-31% above Street," Jefferies' analysts said in a 14 December report, projecting strong annual free cash flow between ₹8,000-14,800 crore.
Adding to the positive outlook is a declining cost profile. HZL's zinc cost of production (excluding royalty) stood at $1,002 per tonne in H1FY26, down 8% year-on-year and 20% lower than the FY23 peak. This improvement is aided by better recovery rates and a strategic push for renewable energy (RE). The company aims to increase its RE share to 55% by FY27 and 70% by FY28, from just 7% in FY25, which helps offset mining cost inflation.
Currently, the HZL stock trades at an enterprise value of about 12 times its FY27 estimated EBITDA. While this valuation appears demanding, the ongoing strength in silver prices is likely to sustain investor interest in the coming quarters.
