Vedanta, a leading natural resources company, is poised for a significant earnings boost driven by its zinc and silver production. A recent visit to Hindustan Zinc's Rampura Agucha mine revealed a strong medium-term outlook, supported by a secure mine life and high entry barriers.
Key Highlights from the Visit
- Hindustan Zinc contributes 40% to Vedanta's consolidated EBITDA, making it a crucial asset for the company.
- The management expects zinc output to reach ≥1,080kt and silver production of ~700t in FY27, positioning the company in the first quartile of the global zinc cost curve.
- Minimal hedging for FY27 reflects the management's confidence in structural silver tightness, supporting a price-led earnings upside.
Impact on Earnings and Stock Price
At current spot prices, estimates suggest an EBITDA of Rs258bn, ~17% higher than the consensus estimate of Rs220bn. Furthermore, each USD1/oz move in silver price changes Hindustan Zinc's EBITDA by 1%. This underlines the significance of silver exposure to Vedanta's earnings.
The recent surge in Hindustan Zinc and Vedanta's stock price reflects the potential for earnings upgrades. Silver exposure is underpriced, and the company's strong fundamentals make it an attractive investment opportunity.
Investment Considerations
Remember, this analysis is perspective, not prediction. It's essential to do your own research and consult with certified experts before making any investment decisions. The views expressed are based on publicly available information and should not be considered as personalized investment advice.