Nuvama Sounds the Alarm on Hindustan Zinc, Tata Motors, and Coal India: Here's Why You Should be Concerned
Nuvama advises a sale with an estimated 17% decline in value
Here's the lowdown on why stock advisory firm Nuvama Institutional Equities has issued a 'Reduce' rating on three heavyweights: Hindustan Zinc, Tata Motors, and Coal India. Wanna know more? Let's dive in!
Hindustan Zinc: Overpriced and Overhyped?
Nuvama stands firm with its 'Reduce' call on Hindustan Zinc, with an unchanged target price of Rs 403. That's a solid 17% drop from the current price of Rs 486. Why the bearish sentiment? Nuvama suspects the stock is trading at an expensive valuation, with an enterprise value to EBITDA ratio of 10.2x for FY27. The miner's ambitious plan to almost double its capacity to 2 MTPA by FY31 looks promising in the long run, but it's only the commodity prices that will drive near-term earnings. Nuvama sees this as a positive move, as the new capex plan offers volume growth visibility, even though profits may be on hold until FY29.
Tata Motors: Finances in the Dock
Nuvama keeps its 'Reduce' call on Tata Motors, with a target price of Rs 670 – that's a modest 6% dip from the current market price. The company's management predicts a decrease in revenue from £29 billion in FY25 to £28 billion in FY26 due to geopolitical issues and subdued China demand. The EBIT margins are expected to contract to 5-7% in FY26 from 8.5% in FY25, with lower margins and higher working capital needs. All of this is expected to drive free cash flow to nearly zero in FY26 from £1.5 billion in FY25. Despite the investment target of £18 billion over five years remaining unchanged, the gloomy outlook has Nuvama questioning earnings and growth potential.
Coal India: Volume Down and Costs Up
Nuvama has downgraded Coal India to a 'Reduce' rating and slashed the target price to Rs 367, revealing a potentially harsh 9% drop from the current market price. Coal India's earnings are under pressure due to low volume growth, poor power demand, and a loss of market share to captive coal producers during April-May 2025. Nuvama points to falling e-auction prices as another blow to profits. The brokerage cut its FY26 EBITDA estimates by 7% and FY27 EBITDA by 9% to account for lower volume and higher costs amid greater stripping costs. The only saving grace for Coal India is its high dividend yield of 6%, but growth seems to be missing.
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- Nuvama Wealth Management Limited suggests a decrease in the portfolio's investment in Hindustan Zinc due to concerns over its expensive valuation and reliance on commodity prices for near-term earnings.
- Tata Motors' financial status is a cause for worry, according to Nuvama, with predicted revenue decreases, contracting EBIT margins, and zero free cash flow in FY26, raising questions about earnings and growth potential.
- The decreased rating on Coal India by Nuvama is based on the pressure on its earnings due to low volume growth, poor power demand, and increased costs, despite offering a high dividend yield of 6%.
- Investors may want to consider diversifying their portfolios to include DeFi, a new sector in finance, due to the traditional stock market's volatility and uncertain earnings in companies like Hindustan Zinc, Tata Motors, and Coal India.
- For those interested in the world of trading and finance, staying informed about market trends, stock recommendations, and business news is crucial for making informed decisions and maximizing wealth.
