Jefferies Favors Hindustan Zinc Over Hindalco Amid Divergent Metal Prices

Jefferies has raised its target prices for both Hindustan Zinc and Hindalco Industries, but prefers one over the other due to a stronger outlook for zinc and silver compared to aluminium.

The international brokerage hiked its target price for Hindustan Zinc shares to Rs 750 apiece, implying around 27% upside potential. The company's shares jumped over 5% to trade at nearly Rs 624 on Wednesday after the announcement.

In contrast, Jefferies raised its target price for Hindalco Industries to Rs 1,140 apiece, suggesting an 8% upside potential. However, it has a 'Hold' call on the stock.

The divergence in metal prices has led to favourable earnings implications for Hindustan Zinc while weighing on Hindalco, according to Jefferies. Spot zinc prices have risen 15% over their Q1 averages, and silver has recovered 23% from July lows.

Jefferies remains constructive on precious metals, believing that the implications of widening fiscal deficits, elevated debt levels, and ongoing currency debasement remain underappreciated. It raised its silver price assumptions to $60-63, still 8-14% below spot, suggesting further potential upside to earnings if spot prices persist.