The December 2025 quarter marked a watershed moment for Hindustan Zinc, with the company achieving its highest-ever quarterly revenue of ₹10,980.00 crores and record operating profit (PBDIT excluding other income) of ₹6,054.00 crores. The 28.44% sequential revenue growth reflected both volume expansion and improved metal price realisation, whilst the company's operating margin expanded to 56.97%—the highest in the trailing eight quarters—demonstrating exceptional operational leverage and cost discipline.
Following the results announcement, the stock has gained significant momentum, trading well above all key moving averages. Over the past three months, Hindustan Zinc has delivered a stellar 32.23% return, outperforming the Sensex by 33.07 percentage points, whilst the six-month return stands at an impressive 51.79%. The stock currently trades near its 52-week high of ₹670.00, just 1.31% away from that peak.
Financial Performance: Margin Expansion Drives Profitability Surge
Hindustan Zinc's third-quarter performance showcased remarkable financial strength across all key parameters. Net sales surged to ₹10,980.00 crores in Q3 FY26, up 28.44% from ₹8,549.00 crores in Q2 FY26 and 27.47% higher than ₹8,614.00 crores in the year-ago quarter. This sequential acceleration marked the company's strongest quarterly revenue performance on record, driven by favourable zinc and lead price realisations in global markets.
Operating profit (PBDIT excluding other income) climbed to ₹6,054.00 crores in Q3 FY26, representing a 36.21% quarter-on-quarter increase and 34.56% year-on-year growth. More impressively, the operating margin (excluding other income) expanded to 56.97%, up from 53.67% in Q2 FY26 and 54.11% in Q3 FY25. This 330 basis point sequential margin expansion reflected the company's ability to capture pricing gains whilst maintaining tight cost control.
Net profit surged to ₹3,916.00 crores in Q3 FY26, up 47.83% from ₹2,649.00 crores in Q2 FY26 and 46.23% higher than ₹2,678.00 crores in the corresponding quarter last year. The PAT margin expanded significantly to 36.85%, up from 31.99% in the previous quarter, demonstrating strong operating leverage as revenue growth translated into disproportionately higher bottom-line expansion.
Employee costs remained well-controlled at ₹206.00 crores in Q3 FY26, up modestly from ₹188.00 crores in Q2 FY26 but substantially lower than ₹243.00 crores in Q3 FY25. Interest costs declined to ₹195.00 crores from ₹259.00 crores sequentially, reflecting improved working capital management and debt optimisation. The tax rate stood at 25.12% in Q3 FY26, consistent with the 25.21% in the previous quarter, indicating stable effective tax management.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | Operating Margin | PAT Margin |
|---|---|---|---|---|---|---|
| Dec'25 | 10,980.00 | +28.44% | 3,916.00 | +47.83% | 56.97% | 36.85% |
| Sep'25 | 8,549.00 | +10.01% | 2,649.00 | +18.58% | 53.67% | 31.99% |
| Jun'25 | 7,771.00 | -14.48% | 2,234.00 | -25.61% | 50.84% | 29.43% |
| Mar'25 | 9,087.00 | +5.49% | 3,003.00 | +12.14% | 54.59% | 34.01% |
| Dec'24 | 8,614.00 | +4.39% | 2,678.00 | +15.08% | 54.11% | 32.21% |
| Sep'24 | 8,252.00 | +1.50% | 2,327.00 | -0.77% | 51.51% | 29.07% |
| Jun'24 | 8,130.00 | — | 2,345.00 | — | 49.99% | 29.71% |
Operational Excellence: Industry-Leading Return Ratios Signal Capital Efficiency
Hindustan Zinc's operational metrics underscore its position as one of India's most efficiently managed industrial enterprises. The company's return on capital employed (ROCE) stands at an exceptional 82.40% for the latest period, compared to the five-year average of 86.91%, whilst return on equity (ROE) reached 77.13%, against a five-year average of 72.70%. These extraordinarily high return ratios—amongst the highest in Indian manufacturing—reflect the company's capital-light expansion strategy, superior operational efficiency, and pricing power in the zinc-lead market.
The company's balance sheet remains robust, with shareholder funds of ₹13,326.00 crores as of March 2025, supported by long-term debt of ₹5,990.00 crores. The debt-to-EBITDA ratio stands at a comfortable 0.58 times, whilst net debt to equity is a modest 0.23, providing ample financial flexibility for growth investments and shareholder distributions. Fixed assets stood at ₹18,608.00 crores, reflecting the company's substantial mining and smelting infrastructure across Rajasthan.
Exceptional Capital Efficiency
Hindustan Zinc's ROCE of 82.40% and ROE of 77.13% place it amongst India's most profitable large-cap companies. The company's ability to generate such high returns stems from its integrated mining-to-metal operations, low-cost production base, and dominant market position in zinc and lead. With operating profit to interest coverage at 31.05 times in Q3 FY26—the highest on record—the company demonstrates exceptional debt servicing capability despite modest leverage.
Cash flow generation remained strong, with operating cash flow of ₹14,160.00 crores in FY25, up from ₹13,346.00 crores in FY24. The company deployed ₹2,706.00 crores in investing activities during FY25, primarily for capacity expansion and mine development, whilst returning ₹11,411.00 crores to stakeholders through dividends and other financing activities. This disciplined capital allocation reflects management's commitment to balancing growth investments with shareholder returns.
The company's dividend payout ratio of 70.79% demonstrates its commitment to returning surplus cash to shareholders. The latest dividend of ₹19 per share, with an ex-dividend date of August 28, 2024, underscores the company's strong cash generation capabilities. However, dividend yield data is currently not available for assessment.
Margin Dynamics: Pricing Power Meets Operational Leverage
The substantial margin expansion in Q3 FY26 reflects Hindustan Zinc's ability to capitalise on favourable metal price movements whilst maintaining operational discipline. The gross profit margin expanded to 58.13% in Q3 FY26 from 53.42% in Q2 FY26, driven by improved zinc and lead price realisations in international markets. The company's integrated operations—spanning mining, smelting, and refining—enable it to capture value across the entire production chain.
Operating profit (PBDIT) reached ₹6,347.00 crores in Q3 FY26, including other income of ₹293.00 crores, up from ₹4,683.00 crores in the previous quarter. The operating profit margin stood at 57.82%, reflecting the company's pricing power and operational efficiency. Depreciation of ₹947.00 crores in Q3 FY26, up from ₹882.00 crores in Q2 FY26, reflects ongoing capital investments in mine development and capacity expansion.
For the full year FY25, the company posted net sales of ₹34,083.00 crores, representing 17.8% year-on-year growth, with operating profit (excluding other income) of ₹17,388.00 crores at a 51.0% margin. Net profit for FY25 stood at ₹10,353.00 crores, up 33.4% from ₹7,759.00 crores in FY24, demonstrating sustained profitability improvement across the fiscal year.
| Metric | Q3 FY26 | Q2 FY26 | Q3 FY25 | Change (QoQ) | Change (YoY) |
|---|---|---|---|---|---|
| Operating Margin (Excl OI) | 56.97% | 53.67% | 54.11% | +330 bps | +286 bps |
| Gross Profit Margin | 58.13% | 53.42% | 53.30% | +471 bps | +483 bps |
| PAT Margin | 36.85% | 31.99% | 32.21% | +486 bps | +464 bps |
| PBDIT (₹ Cr) | 6,347.00 | 4,683.00 | 4,717.00 | +35.53% | +34.55% |
Industry Leadership: How Hindustan Zinc Compares to Peers
Within the non-ferrous metals sector, Hindustan Zinc stands out for its superior return metrics and operational efficiency, though this quality comes at a valuation premium. The company's ROE of 72.70% significantly outpaces sector peers including Vedanta (25.84%), Hindalco Industries (12.42%), and National Aluminium (19.44%), reflecting its focused zinc-lead operations and integrated business model.
The company's price-to-book ratio of 20.40 times appears elevated compared to peers such as Vedanta (6.57x), Hindalco (1.56x), and National Aluminium (3.41x). However, this premium valuation is justified by Hindustan Zinc's exceptional return profile—the company generates nearly three times the ROE of its closest peer whilst maintaining lower leverage. The price-to-earnings ratio of 26.45 times is higher than Vedanta (19.60x), Hindalco (11.78x), and National Aluminium (11.07x), but lower than smaller peers like Hindustan Copper (93.27x).
| Company | P/E (TTM) | P/BV | ROE (%) | Debt to Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Hindustan Zinc | 26.45 | 20.40 | 72.70 | 0.23 | — |
| Vedanta | 19.60 | 6.57 | 25.84 | 1.57 | 3.41 |
| Hindalco Industries | 11.78 | 1.56 | 12.42 | 0.37 | 0.53 |
| National Aluminium | 11.07 | 3.41 | 19.44 | -0.40 | 2.85 |
| Hindustan Copper | 93.27 | 17.77 | 15.73 | -0.04 | 0.26 |
Hindustan Zinc's debt-to-equity ratio of 0.23 is amongst the lowest in the sector, providing significant financial flexibility compared to Vedanta's 1.57 and Hindalco's 0.37. This conservative leverage, combined with industry-leading profitability, positions the company to navigate commodity price cycles whilst maintaining consistent shareholder distributions. With a market capitalisation of ₹2,76,188.00 crores, Hindustan Zinc is the largest company in the non-ferrous metals sector.
Valuation Analysis: Premium Pricing for Quality Franchise
Hindustan Zinc's current valuation of 26.45 times trailing twelve-month earnings reflects investor recognition of its exceptional business quality, though the stock is rated "Very Expensive" based on historical metrics. The price-to-book ratio of 20.40 times appears steep on the surface, but the company's ROE of 77.13% provides fundamental support for this premium—the stock trades at approximately 3.8 times its ROE-to-P/BV ratio, suggesting the market is pricing in sustained high returns.
The enterprise value-to-EBITDA multiple of 16.03 times and EV-to-EBIT of 20.31 times indicate the market is assigning a quality premium to Hindustan Zinc's integrated operations and market leadership position. The EV-to-sales ratio of 8.31 times reflects the company's superior margin profile compared to peers. The PEG ratio of 1.32 suggests the valuation is reasonably aligned with the company's five-year sales growth rate of 7.33%, though investors are clearly paying for quality and consistency rather than explosive growth.
The stock currently trades at ₹661.20, just 1.31% below its 52-week high of ₹670.00 and 74.62% above its 52-week low of ₹378.65. The valuation grade has been "Very Expensive" since October 2023, though this has not prevented the stock from delivering strong returns—up 44.76% over the past year and 109.74% over two years. The premium valuation reflects the scarcity value of a high-quality, large-cap metals play with consistent cash generation and shareholder-friendly policies.
"With ROCE exceeding 82% and margins at multi-quarter highs, Hindustan Zinc demonstrates that quality commands a deserved premium in commodity businesses."
Shareholding: Promoter Stability Anchors Institutional Confidence
The shareholding pattern reveals a stable ownership structure with Vedanta Ltd. maintaining a commanding 61.84% promoter stake as of December 2025, unchanged from September 2025 but down from 63.42% in March 2025. The 1.58 percentage point reduction in promoter holding during Q1 FY26 was likely related to regulatory or strategic considerations, but the subsequent stability suggests no further near-term dilution is anticipated.
Institutional participation has shown encouraging trends, with mutual fund holdings rising progressively from 0.11% in December 2024 to 1.07% in December 2025—a nearly tenfold increase that signals growing domestic institutional interest. Foreign institutional investor (FII) holdings increased to 1.54% in Q3 FY26 from 1.31% in Q2 FY26, indicating renewed international investor appetite following the strong quarterly results.
| Investor Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter Holding | 61.84% | 61.84% | 61.84% | 63.42% | 0.00% |
| FII Holding | 1.54% | 1.31% | 1.36% | 1.42% | +0.23% |
| Mutual Fund Holding | 1.07% | 0.98% | 0.75% | 0.17% | +0.09% |
| Insurance Holdings | 3.59% | 3.92% | 4.03% | 3.96% | -0.33% |
| Other DII Holdings | 27.94% | 27.94% | 27.95% | 27.93% | 0.00% |
| Non-Institutional | 4.01% | 4.01% | 4.07% | 3.10% | 0.00% |
Insurance company holdings declined to 3.59% in December 2025 from 3.92% in September 2025, representing a 0.33 percentage point reduction. However, other domestic institutional investors (DII) maintained a substantial 27.94% stake, unchanged sequentially, providing stability to the shareholder base. The total institutional holding of 34.15% reflects strong conviction amongst professional investors, supported by 230 FIIs and 40 mutual funds holding positions in the stock.
Stock Performance: Sustained Momentum Across Timeframes
Hindustan Zinc's stock has delivered exceptional returns across multiple timeframes, significantly outperforming the broader market. The one-year return of 44.76% compares favourably to the Sensex's 8.65% gain, generating alpha of 36.11 percentage points. The three-month return of 32.23% demonstrates accelerating momentum, with the stock outperforming the Sensex by 33.07 percentage points during this period.
The stock's technical positioning is robust, trading above all key moving averages—5-day (₹631.23), 20-day (₹620.13), 50-day (₹545.62), 100-day (₹506.23), and 200-day (₹475.26)—indicating strong upward momentum across short, medium, and long-term timeframes. The current price of ₹661.20 represents a 7.99% year-to-date gain, outperforming the Sensex's 2.32% decline by 10.31 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | 5.35% | -0.75% | +6.10% |
| 1 Month | 12.28% | -1.98% | +14.26% |
| 3 Months | 32.23% | -0.84% | +33.07% |
| 6 Months | 51.79% | 1.82% | +49.97% |
| YTD | 7.99% | -2.32% | +10.31% |
| 1 Year | 44.76% | 8.65% | +36.11% |
| 2 Years | 109.74% | 16.13% | +93.61% |
| 3 Years | 75.13% | 36.79% | +38.34% |
Longer-term performance remains impressive, with two-year returns of 109.74% (alpha of 93.61 percentage points) and three-year returns of 75.13% (alpha of 38.34 percentage points). The five-year return of 120.92% and ten-year return of 377.40% underscore the stock's wealth-creation potential for patient investors. The stock's beta of 1.00 indicates it moves in line with the market, though recent performance suggests it's capturing sector-specific tailwinds.
The technical trend turned "Bullish" on January 6, 2026, at ₹642.95, upgrading from "Mildly Bullish." Key technical indicators show strength, with MACD, Bollinger Bands, and KST all signalling bullish momentum on weekly charts. The on-balance volume (OBV) indicator shows a bullish trend on monthly charts, suggesting sustained accumulation. With immediate support at the 52-week low of ₹378.65 and resistance at ₹670.00, the stock has ample room for further upside if metal prices remain supportive.
Investment Thesis: Quality Franchise Trading at Full Valuation
Hindustan Zinc presents a compelling investment case built on exceptional operational metrics, industry-leading profitability, and consistent cash generation. The company's proprietary Mojo Score of 71 out of 100 supports a "BUY" rating, upgraded from "SELL" in October 2025 when the stock traded at ₹512.25. The score reflects positive near-term drivers (quarterly financial trend and bullish technicals), good quality fundamentals, but very expensive valuation.
The investment case is anchored by several structural strengths: exceptional management efficiency with ROCE of 82.40%, strong debt servicing capability with operating profit to interest coverage of 31.05 times, and dominant market position in zinc-lead production. The company's ability to generate consistent high returns across commodity cycles, supported by integrated operations and low-cost production, differentiates it from peers.
However, investors must weigh these strengths against the "Very Expensive" valuation grade. At 26.45 times trailing earnings and 20.40 times book value, the stock prices in sustained high profitability and leaves little room for margin disappointment or metal price weakness. The valuation has remained in expensive territory since July 2023, suggesting the market is willing to pay a premium for quality and consistency in the volatile metals sector.
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Exceptional Return Metrics: ROCE of 82.40% and ROE of 77.13% amongst highest in Indian manufacturing, demonstrating superior capital efficiency
- Record Profitability: Q3 FY26 net profit of ₹3,916.00 crores represents highest quarterly profit ever, with 47.83% QoQ growth
- Margin Expansion: Operating margin (excluding OI) at 56.97%, up 330 bps QoQ, reflects pricing power and operational leverage
- Strong Balance Sheet: Debt-to-EBITDA of 0.58 times and net debt-to-equity of 0.23 provide financial flexibility
- Dominant Market Position: Largest integrated zinc-lead-silver producer in India with established infrastructure
- Consistent Cash Generation: Operating cash flow of ₹14,160.00 crores in FY25 supports dividend payout ratio of 70.79%
- Rising Institutional Interest: Mutual fund holdings increased nearly tenfold to 1.07% over past year
KEY CONCERNS ⚠
- Very Expensive Valuation: P/E of 26.45x and P/BV of 20.40x leave limited margin of safety for earnings disappointments
- Commodity Price Exposure: Profitability highly sensitive to global zinc and lead prices, which are cyclical and volatile
- High Promoter Pledge: Pledged shares at 90.28% raise concerns about financial stress at parent Vedanta Ltd.
- Limited Growth Visibility: Five-year sales growth of 7.33% suggests mature business with modest expansion potential
- Sector Underperformance: One-year return of 44.76% trails non-ferrous metals sector return of 47.51% by 2.75 percentage points
- Declining Cash Position: Cash and cash equivalents fell to lowest levels in H1 FY26 at ₹151.00 crores
- Regulatory & Environmental Risks: Mining operations subject to environmental regulations and community relations challenges
Outlook: What Lies Ahead
POSITIVE CATALYSTS
- Sustained Metal Prices: Favourable zinc-lead pricing environment supporting margin expansion
- Operational Leverage: Fixed cost base allows revenue growth to flow disproportionately to bottom line
- Capacity Expansion: Ongoing mine development and smelter optimisation to drive volume growth
- Technical Momentum: Bullish trend with stock trading above all moving averages suggests continued upside
- Dividend Sustainability: Strong cash generation supports continued high dividend payouts
RED FLAGS
- Valuation Compression Risk: Any earnings miss or margin pressure could trigger sharp de-rating from expensive levels
- Metal Price Correction: Global economic slowdown or China demand weakness could pressure realisations
- Parent Company Concerns: High promoter pledge reflects Vedanta Ltd.'s financial stress, potential overhang
- Rising Input Costs: Power and fuel cost inflation could compress margins if not passed through
- Regulatory Headwinds: Stricter environmental norms or mining restrictions could impact operations
The Verdict: Quality at a Price—Selective Accumulation for Long-Term Investors
Score: 71/100
For Fresh Investors: Consider selective accumulation on dips below ₹630-640 levels. Whilst the stock trades at premium valuations, the exceptional return metrics (ROCE 82.40%, ROE 77.13%), record profitability, and strong technical momentum justify a position for investors with 2-3 year horizons. The "Very Expensive" valuation grade warrants caution—avoid aggressive buying at current levels and build positions gradually.
For Existing Holders: Continue holding with confidence. The Q3 FY26 results validate the quality thesis, with operating margins at multi-quarter highs and net profit surging 47.83% quarter-on-quarter. The combination of good quality fundamentals, positive financial trends, and bullish technicals supports retention. Consider booking partial profits above ₹670 (52-week high) to rebalance, but maintain core holding for long-term wealth creation.
Fair Value Estimate: ₹720-750 based on sustainable 30-32% PAT margins and 24-26x P/E multiple (8-13% upside from current levels). However, any metal price correction or margin pressure could see the stock retrace to ₹580-600 support zone.
Rationale: Hindustan Zinc exemplifies a high-quality industrial franchise trading at full valuation. The record Q3 FY26 performance—driven by favourable metal prices and operational excellence—demonstrates the company's ability to capitalise on cyclical upswings. Whilst the "Very Expensive" tag warrants selectivity, the combination of industry-leading returns, strong balance sheet, and consistent cash generation justifies a BUY rating for patient investors willing to pay for quality. The key risk remains valuation compression if commodity prices soften or margins normalise.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
