Hindustan Zinc surges 19% to a record; experts against fresh entry now
Hindustan Zinc's rally to ₹540.95 was driven by silver prices and optimism, despite concerns like rising debt and limited free float. Analysts caution on valuations, advising buying on dips around ₹430 for short-term support.
Mumbai: The recent rally in prices of silver and around increased of the metal have fuelled a rally in the shares of , which surged nearly 19% intra-day Friday to hit a lifetime high of ₹540.95. With Friday's gains, the shares have gained more than a staggering 80% since April, with a rally in also contributing to the gains.While the stock remains in a positive momentum, are cautioning against buying the stock at current levels, and in fact, recommend taking some profits off the table given that are expensive after the recent gains.
"Some of the key concerns for the company include the increase in debt level over the last two years, no major for the company and company already operating at optimal level," said Parthiv Jhonsa, analyst at . "And because it has a , movement in the company tends to be quite drastic," he said.
Nearly 65% of Hindustan Zinc is owned by , while the government owns another 29.5% stake. Insurance companies own nearly 3% of the company, leaving it with a limited free float.
Hindustan Zinc is the country's largest producer of both zinc and silver, and while zinc and lead bought in around 55% of its consolidated operating profit, silver's contribution has risen to a hefty 45% in 2023-24 (Apr-Mar), from around 36% a year ago.
The prices of silver, meanwhile, are up 13% since April, and were close to Rs 86,000/kg on the MCX on Friday. Zinc prices have rallied more than 20% since April.
"Both zinc and have been rallying, supporting Hindustan Zinc. Other than this, fundamentals are stable," said Aditya Welekar, analyst at .
While a significant correction in the shares can be ruled out because zinc prices have found support at a higher level, a further rally is also difficult because the valuations are full, he said.
Short-term support for the stock is only around ₹430, and hence, traders should look at buying on dips, said Sahaj Agrawal, the head of derivatives at .
Source: Stocks-Markets-Economic Times
