Hindustan Copper: Strong metal cycle aids earnings growth, but valuation is not cheap

Hindustan Copper Ltd shares are down about 6.5%, following the closure of the offer for sale (OFS) by the central government, priced at a floor of ₹ 514 apiece.

The total mop-up would be around ₹ 3,000 crore, including the green-shoe option, while reducing the government’s stake by about 6% to 60.1%. Despite the near-term pressure on the stock, strong investor participation in the OFS reflects Hindustan Copper’s robust growth outlook.

The company’s earnings have seen a marked improvement recently, helped by the steep increase in copper prices, besides limited domestic production capacity. Global copper prices have risen by 45% year-on-year to $14,500 per tonne at the London Metal Exchange (LME), supported by the demand-supply imbalance and drawdown in LME inventory.

Demand for copper remains solid, driven by structural growth in electric vehicles , charging infrastructure, renewable energy and transmission grids. At the same time, supplies have dropped after the imposition of a ban on exports of raw copper concentrates by the Democratic Republic of Congo and lower output in Chile.

Given this backdrop, Hindustan Copper looks well placed to benefit from the favourable copper cycle. It is India’s sole copper ore mining company, with production of 3.7 million tonnes (mt) of ore in FY26. The company targets 4.7 mt of production in FY27 and aims to reach 12.2 million tonnes per annum on completion of its expansion projects by FY30.

The company plans to invest around ₹ 7,000 crore over the next 5-6 years, a sharp increase from about ₹ 2,000 crore of cumulative capital expenditure incurred over the past five years till FY26.

The expansion plan is aided by sizeable ore reserves of 157 mt, and another 610 mt of resources, or copper deposits, that have the potential for commercial viability.

Importantly, the reserves have a higher copper content of about 1.3%, against the global average of 0.5%, leading to lower processing costs and higher profitability.

Amid buoyant market conditions, Hindustan Copper’s revenue for the June quarter (Q1FY27) rose 81% year-on-year to ₹ 936 crore, helped by almost 50% growth in price realisation and a 21% increase in volumes.

Ebitda increased at a faster pace of 140% to over ₹ 500 crore, supported by higher operating leverage and lower treatment and refining charges (TC/RC). TC/RC charges are what Hindustan Copper pays to third-party smelters for processing and refining copper ore, as it does not have sufficient processing capacity.

Q1FY27 performance follows a strong H2FY26, when Ebitda had grown by almost 160%, versus 36% in H1FY26.

Anand Rathi Research expects the momentum to continue in FY27, projecting Ebitda growth of 76% on 58% revenue growth. “With copper fundamentals being one of the strongest in non-ferrous metals, we remain confident on Hindustan Copper’s future growth prospects,” it noted.

Notwithstanding the recent drop, the stock is up a whopping 130% in the past one year. At an enterprise value of about 21 times FY27 estimated Ebitda, as per Bloomberg , valuation looks stiff.

Investors would need to be watchful of a correction in copper prices , which can weigh on the company’s earnings trajectory.