India Infrastructure Supercycle And EV Growth Will Drive Demand

Key Takeaways

• Rapid scaling of renewables, domestic coal use, and advanced tech adoption can drive substantial margin and cash flow outperformance versus expectations.
  
• Strategic moves into critical minerals, automation, and new product lines position Hindustan Zinc for strong, diversified growth linked to green energy and infrastructure trends.
  
• Heavy reliance on zinc, rising costs, regulatory pressures, and governance concerns threaten margins, expose earnings to volatility, and could undermine long-term growth and investor confidence.

Catalysts

Explores for, extracts, and processes minerals in India, rest of Asia, and internationally.

• Analyst consensus expects increased renewable energy mix will reduce power costs and marginally enhance margins, but with Hindustan Zinc achieving 19% renewables already and sharply scaling capacity in 2025, a rapid acceleration beyond 35% is underway; this, along with the surge in domestic coal sourcing and plummeting power costs, could push net margins and free cash flow far above consensus in the next 2–3 years.
  
• While analysts expect incremental silver and lead recovery through new technologies, management's aggressive fumer ramp-up, faster debottlenecking, and optimized concentrate usage in high-silver price environments can drive surges in silver output and earnings, with precious metals already forming over 40% of profits and poised for multi-year outperformance if silver prices remain at highs.
  
• The company's proactive move into critical minerals-potash, rare earths, and tungsten-enables the creation of entirely new business lines outside zinc and silver, providing early access to high-growth, strategic markets essential for renewables and electrification, and creating significant optionality for revenue and margin expansion that is ignored by the market.
  
• Hindustan Zinc is uniquely positioned to capture outsized benefits from India's infrastructure supercycle and the global pivot to green energy and EVs, given its large upcoming capacity additions, product diversification (alloys, fertilizers), and leadership in low-cost, high-purity metal supply; this aligns long-term revenue growth with very robust demand drivers not yet reflected in valuation.
  
• Industry-leading adoption of automation, deep AI-driven process optimization, and partnerships with dozens of tech startups under the Vedanta Spark program position Hindustan Zinc to unlock step-change productivity gains, further reduce operating costs, and sustain its edge as the lowest-cost, ESG-compliant producer, supporting sustained high EBITDA margins and market share.

Hindustan Zinc Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Hindustan Zinc compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Hindustan Zinc's revenue will grow by 8.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 31.3% today to 32.0% in 3 years time.
• The bullish analysts expect earnings to reach ₹132.9 billion (and earnings per share of ₹31.43) by about September 2028, up from ₹102.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 26.5x on those 2028 earnings, up from 17.9x today. This future PE is greater than the current PE for the IN Metals and Mining industry at 23.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.89%, as per the Simply Wall St company report.

Hindustan Zinc Future Earnings Per Share Growth

Risks

• Deteriorating ore grades at key mines like Rampura Agucha and SK, along with the natural progression of mining deeper ore bodies, are likely to lift extraction costs and reduce yields, potentially lowering net margins and requiring higher capital expenditures over time.
  
• Over 80 percent of Hindustan Zinc's revenue remains zinc-dependent, exposing the company to volatility in global zinc prices and cyclical downturns in zinc demand, which could significantly impact overall revenue and earnings.
  
• Stringent global environmental regulations, rising ESG expectations, and potential carbon taxes will increase compliance and operational costs, compressing future profitability as the company still relies heavily on coal for power and has seen rising greenhouse gas emissions in recent quarters.
  
• Growing adoption of metal recycling and the global shift to decarbonization and renewable energy poses risks to long-term zinc demand in traditional sectors like construction and automotive, threatening Hindustan Zinc's volume growth and market share.
  
• Corporate governance concerns, including ongoing brand fee increases, expansion-related capital allocation risks, and uncertainty from periodic government/professional stake sales, may create investor unease and raise the company's cost of capital, negatively affecting valuation multiples.

Valuation

• The assumed bullish price target for Hindustan Zinc is ₹564.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Hindustan Zinc's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹564.0, and the most bearish reporting a price target of just ₹335.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ₹416.0 billion, earnings will come to ₹132.9 billion, and it would be trading on a PE ratio of 26.5x, assuming you use a discount rate of 13.9%.
• Given the current share price of ₹432.95, the bullish analyst price target of ₹564.0 is 23.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.