Investors who purchased Hindustan Zinc shares a few sessions ago have reaped higher returns than those who held their investments in the stock for six years. The company, which is the country’s only integrated producer of zinc, lead, and silver, saw its shares climb from ₹292 apiece to 431.95 in just nine sessions, resulting in a staggering gain of 48%.
In contrast, investors who maintained their stake in the stock over the past six years experienced a gain of only 43.7%. The recent substantial rally in the shares was driven by several positive developments, which boosted investor sentiment towards the company.
The company, a subsidiary of the Vedanta Group, specialises in the exploration, mining, and smelting of zinc, lead, and other non-ferrous metals. The company’s products include zinc ore, lead zinc concentrate, zinc metal, lead metal, cadmium metal, silver metal, and sulfuric acid.
The company is ranked as the world’s second-largest integrated zinc producer and the fifth-largest silver producer. With its headquarters located in Zinc City, Udaipur, the company governs about 80% of India’s expanding zinc market, its website showed.
The prices of industry metals in recent weeks have grown sharply, driven by the upswing in global manufacturing activities. This surge is expected to improve company margins, as the relatively stable production costs juxtaposed with increased selling prices result in higher profits per unit sold.
Similarly, the sharp rally in the silver prices to multi-year highs has further bolstered the company’s shares.
Stellar performance
In the fourth quarter of the previous fiscal year, the company achieved its highest-ever quarterly refined metal production, totaling 273 kt, showing a 6% increase sequentially due to enhanced plant availability and a 1% increase year-on-year (YoY).
Refined zinc production reached 220 kt, marking a 9% increase quarter-on-quarter (QoQ) and a 2% increase YoY. However, refined lead production stood at 53 kt, reflecting a 2% decrease YoY and a 5% decrease QoQ.
Mined metal production stood at 299 kt, representing an 11% increase in QoQ, attributed to improved mined metal grades and increased ore production across mines. Saleable silver production reached 6.1 Moz, up 4% YoY, primarily due to work-in-progress (WIP) depletion in the current quarter, with a 4% decrease QoQ, aligning with lead metal production, partially offset by WIP depletion.
For the entire FY24, the company achieved its highest-ever mined metal production of 1,079 kt, reflecting a 2% increase YoY, driven by enhanced mined metal grades. Refined metal production also reached its highest annual output.
Silver volume in FY24 reached its peak, consistent with the management’s operational and financial strategy, totaling 24.0 Moz, up 5% YoY. Additionally, refined lead production stood at 216 kt, marking a 3% increase YoY.
Brighter outlook
The outlook for zinc, lead, and silver appears promising, driven by various factors that underscore their importance across industries and markets.
Zinc demand in the domestic market is primarily propelled by the coated steel industry, infrastructure development, construction projects, railways, and the automobile sector.
The country’s ambitious goal of achieving an annual steel production of 300 million metric tons by 2030, supported by the Government of India’s production-linked incentive (PLI) scheme, is expected to drive zinc demand further.
The emphasis on producing corrosion-free steel rails for enhanced safety and speed in India’s rail network is poised to significantly increase the country’s zinc requirements.
Future demand for lead is anticipated to be fueled by increasing urbanisation, industrialisation, and automotive consumption, particularly in developing countries. Hindustan Zinc is experiencing robust demand for lead, driven by strong automotive sales, evident in rising numbers of passenger vehicles and two-wheelers.
Further, the industrial battery segment is witnessing strong demand, driven by replacements in critical applications such as data centers, banks, and ATMs.
Meanwhile, the silver demand in India rebounded in CY22 after a subdued performance in 2020 and 2021, with record imports recorded in CY24 due to growing demand and investment interest.
The solar panel manufacturing industry in India is driving increased silver consumption, supported by government initiatives like production-linked incentives aimed at promoting renewable energy sources.
Domestic silver demand is expected to rise further as investments in silver, both in physical form and through exchange-traded funds (ETFs), continue to increase, indicating growing confidence in the metal’s investment potential.
Disclaimer: We advise investors to check with certified experts before taking any investment decisions.