Hindustan Zinc Ltd is Rated Hold

Current Rating and Its Implications

MarketsMOJO’s 'Hold' rating for Hindustan Zinc Ltd indicates a balanced stance towards the stock, suggesting that investors should maintain their existing positions rather than aggressively buying or selling. This rating reflects a nuanced view of the company’s strengths and challenges, based on a comprehensive evaluation of quality, valuation, financial trends, and technical indicators. The rating was adjusted on 13 February 2026, when the Mojo Score declined by 7 points from 71 to 64, signalling a more cautious outlook compared to the previous 'Buy' grade.

Quality Assessment

As of 27 February 2026, Hindustan Zinc Ltd maintains a strong quality profile. The company boasts a high Return on Capital Employed (ROCE) of 85.81%, demonstrating exceptional management efficiency in deploying capital to generate profits. This figure is well above industry averages, underscoring the firm’s operational excellence. Additionally, the company’s ability to service debt remains robust, with a low Debt to EBITDA ratio of 0.15 times, indicating minimal leverage risk and financial stability. These factors contribute positively to the overall quality grade, which is currently rated as 'good'.

Valuation Considerations

Despite its strong fundamentals, Hindustan Zinc Ltd is classified as 'very expensive' in terms of valuation. The stock trades at a high Enterprise Value to Capital Employed ratio of 15.4, reflecting elevated market expectations. While the company’s valuation is somewhat discounted relative to its peers’ historical averages, the premium remains significant. Investors should note that the price-to-earnings growth (PEG) ratio stands at 0.9, suggesting that the stock’s price growth is somewhat aligned with its earnings growth, which has risen by 24.7% over the past year. This valuation profile warrants caution, as the stock’s price may already incorporate much of the anticipated growth.

Financial Trend and Performance

The latest data as of 27 February 2026 reveals a mixed financial trend for Hindustan Zinc Ltd. While the company has delivered impressive returns, with a 49.3% gain over the past year and a 42.79% increase over six months, its long-term growth in operating profit has been modest, averaging an annual rate of 5.73% over the last five years. Quarterly results for December 2025 were strong, with net sales reaching a record ₹10,980 crores and PBDIT hitting ₹6,054 crores, alongside an operating profit to interest coverage ratio of 31.05 times, highlighting excellent profitability and interest servicing capacity. However, the relatively slow operating profit growth tempers enthusiasm for sustained expansion.

Technical Outlook

From a technical perspective, Hindustan Zinc Ltd exhibits a mildly bullish trend. The stock has outperformed the BSE500 index over multiple time frames, including one year, three months, and three years, reflecting strong market momentum. Recent price movements show a 0.75% gain on the latest trading day and a 4.16% rise over the past week, although the stock experienced a 15.48% decline over the last month. This volatility suggests some short-term uncertainty, but the overall technical grade remains positive, supporting the 'Hold' recommendation.

Risks and Market Dynamics

Investors should be mindful of certain risks associated with Hindustan Zinc Ltd. Notably, 90.28% of promoter shares are pledged, which could exert downward pressure on the stock price in falling markets due to potential forced selling. This factor adds a layer of risk that investors must consider alongside the company’s strong fundamentals and market performance.

Summary for Investors

In summary, Hindustan Zinc Ltd’s 'Hold' rating reflects a balanced view that recognises the company’s operational strength, solid financial health, and market-beating returns, while also acknowledging its high valuation and certain risk factors. For investors, this rating suggests maintaining current holdings and monitoring the stock closely for changes in valuation or financial trends that could warrant a reassessment. The company’s strong ROCE and debt metrics provide confidence in its core business, but the expensive valuation and promoter share pledging advise caution.

Long-Term Market Performance

Hindustan Zinc Ltd has demonstrated consistent market-beating performance over the long term. The stock’s 49.3% return over the past year significantly outpaces broader indices, and its gains over three months and six months (29.49% and 42.79% respectively) underscore strong momentum. This performance is supported by the company’s ability to generate high returns on capital and maintain a positive financial trend despite a challenging macroeconomic environment. Investors looking for exposure to the non-ferrous metals sector may find this stock appealing for its resilience and growth potential.

Valuation Relative to Peers

While Hindustan Zinc Ltd’s valuation is classified as very expensive, it is important to note that the stock currently trades at a discount compared to its peers’ average historical valuations. This relative valuation suggests that although the stock commands a premium, it may still offer value compared to other companies in the sector. The PEG ratio of 0.9 further indicates that the stock’s price growth is reasonably aligned with earnings growth, which is a positive sign for investors seeking growth at a fair price.

Conclusion

Overall, the 'Hold' rating for Hindustan Zinc Ltd reflects a comprehensive assessment of its current market position as of 27 February 2026. Investors are advised to consider the company’s strong operational metrics and market performance alongside its high valuation and promoter share pledging risks. Maintaining existing positions while monitoring future developments appears to be the prudent approach at this juncture.

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