Nuvama Institutional Equities has a ‘Reduce’ call on three largecap stocks: Hindustan Zinc, Tata Motors, and Coal India. The brokerage house sees a downside of as much as 17% in one of these stocks.
Read to know more about the key triggers for the rating downgrade.
Nuvama on Hindustan Zinc: Stock trades at expensive valuation
Nuvama retained its ‘Reduce’ call on Hindustan Zinc, with an unchanged target price of Rs 403. This is a downside of 17% from the market price of Rs 486. The brokerage expects that Hindustan Zinc is trading expensively at 10.2x enterprise value to EBITDA for FY27. The miner announced growth capex of Rs 32,000–35,000 crore to almost double its capacity to 2 metric tonnes per annum (MTPA) by FY31.
The announcement is a long-term growth enabler; near-term earnings are contingent on commodity prices only. “We view this as a positive step as the new capex plan provides volume growth visibility—even though FY29 onwards with expected payback of more than five years at peak capacity utilisation,” said Nuvama.
Nuvama on Tata Motors: Revenue and margins may drop in FY26
Nuvama has maintained its ‘Reduce’ call on Tata Motors, with a target price of Rs 670, which is 6% lower than the market price of Rs 712. The company’s management expects revenue to decrease from £29 billion in FY25 to £28 billion in FY26, led by geopolitical issues and subdued China demand. Plus, the EBIT margins is expected to contract to 5–7% in FY26 from 8.5% in FY25. Adding to that, lower margin and higher working capital needs shall drag free cash flow to close to zero in FY26 from £1.5 billion in FY25. However, the investment target of £18 billion over five years is unchanged.
“We build in a moderate consolidated revenue and EBITDA CAGR of 3% each over FY25–27,” said Nuvama.
Nuvama on Coal India: Volume dips and cost to increase
Nuvama downgraded Coal India to ‘Reduce’ rating and slashed the target price to Rs 367 from Rs 405, a downside of 9% from the market price of Rs 402. Coal India’s earnings remain under pressure due to a lack of volume growth amid poor power demand as well as a loss of market share to captive coal producers during April–May 2025. “We observe a fall in e-auction prices too, hurting profits,” said Nuvama.
Nuvama is cutting FY26 EBITDA estimates by 7% and FY27 EBITDA by 9% to factor in lower volume and higher CoP amid higher stripping costs. The only saviour for Coal India is a high dividend yield, which is 6%. “We, however, prefer growth, which is missing,” said Nuvama.