Seasoned investor Mukul Agrawal's decision to acquire a fresh stake in Hindustan Construction Company has attracted significant attention, particularly given the infrastructure company's recent financial challenges. The investment appears to signal confidence in the company's structural improvements despite near-term revenue pressures.

Company Overview and Recent Performance

Hindustan Construction Company Limited, established in 1926 and headquartered in Mumbai, operates as a comprehensive engineering and construction company with a market capitalization of Rs 4,780.53 crore. The stock closed at Rs 18.25 per equity share, down 4.45% from the previous day's close of Rs 19.10. As of December 2025, Mukul Mahavir Agarwal acquired a 1.68% stake, representing approximately 4.40 crore shares in the company.

The company's stock performance shows mixed results across different timeframes:

Financial Performance Challenges

HCC's recent financial performance reveals significant headwinds. In Q2 FY26, the company experienced a sharp revenue decline of 31.7% year-on-year, dropping from Rs 1,407 crore to Rs 961 crore. This decline extended beyond a single quarter, with annual revenues showing consistent contraction:

Profitability metrics also reflected pressure, with profit dropping by Rs 64 crore to Rs 48 crore and EBITDA falling by Rs 242 crore to Rs 146 crore in Q2 FY26, indicating challenges in operating margins and project execution.

Valuation Concerns

Despite inconsistent earnings, HCC trades at a premium valuation with a price-to-earnings ratio of 33.43x, significantly above the industry average of 17.1x. This elevated valuation suggests market expectations of an earnings turnaround, though it leaves limited room for execution missteps.

Balance Sheet Transformation

A key factor potentially driving Agrawal's investment is HCC's aggressive debt reduction strategy. The company has substantially improved its financial position:

This deleveraging significantly reduces financial risk and interest burden while improving the company's ability to bid for new projects and execute existing orders efficiently.

Operational Improvements

HCC has demonstrated meaningful improvements in cash flow management, critical for an EPC company. The firm reported operating cash flow of Rs 134 crore and net cash flow of Rs 171 crore. Key operational metrics show enhanced efficiency:

• Cash conversion cycle: Negative 640 days
• Working capital days: 17 days
• Inventory days: Reduced from 183 days to 52 days

These improvements reflect tighter project execution, faster billing, and enhanced collections, strengthening liquidity despite revenue declines.

Robust Order Backlog

HCC maintains a substantial order backlog of Rs 13,152 crore as per its November 2025 investor presentation. The backlog demonstrates strong diversification:

Geographically, projects span multiple states including Maharashtra, Bihar, Uttarakhand, Gujarat, Madhya Pradesh, and Tamil Nadu, reducing concentration risk. Major projects like the Patna Metro and Hindalco's aluminium smelter expansion provide multi-year execution visibility.

Investment Rationale

Mukul Agrawal's investment appears to reflect a contrarian, long-term thesis focusing on structural improvements rather than near-term performance. The combination of a cleaned-up balance sheet, improved cash flows, efficient working capital management, and a sizable diversified order book may indicate potential for operational recovery once infrastructure cycle conditions improve and project execution accelerates.

Shares of Hindustan Zinc surged over 4% on Monday, reaching an intraday high of ₹663.00 after international brokerage HSBC upgraded the stock to Buy from Hold and set a target price of ₹750.00 per share. The upgrade, which implies an 18% upside potential, comes ahead of the company's Q3 earnings announcement. HSBC's revised outlook reflects improved metal price forecasts and stronger fundamentals across the metals sector.

HSBC's Upgraded Forecasts Drive Hindustan Zinc Rating

HSBC incorporated updated LME zinc and silver price forecasts into its analysis, raising FY2026-28 assumptions by approximately 5% to 23%. This revision led to a substantial 12% to 20% increase in EBITDA estimates for FY2027-28. The brokerage now values Hindustan Zinc at 11x FY27E EV/EBITDA, up from the previous 9.5x multiple.

The new valuation places Hindustan Zinc at the higher end of its five-year trading range of 5x to 11x EV/EBITDA. HSBC noted that this premium valuation reflects the company's strong balance sheet and a stable-to-improving outlook for LME zinc and silver prices. The brokerage highlighted further earnings upside potential from current spot LME zinc and silver prices.

Target Price Increases for Hindalco and NALCO

Alongside Hindustan Zinc, HSBC raised target prices for two other metal stocks. For Hindalco, the brokerage increased the target price to ₹1,240.00 from ₹1,060.00, implying a 33% upside potential. The revision follows EBITDA estimate increases of approximately 7% to 10% for FY2027-28.

HSBC factored in higher global LME aluminium and copper price forecasts for Hindalco, increasing FY2026-28 aluminium assumptions by about 5% to 16% and copper forecasts by around 5% to 20%. This drove the approximately 17% upgrade in the target price. The India business maintains a 7x FY27E EV/EBITDA valuation, representing a slight premium to its long-term average given the strong aluminium price outlook.

NALCO Benefits from Operational Improvements

For NALCO, HSBC raised the target price to ₹420.00 from ₹373.00, implying 16% upside, after increasing EBITDA estimates by around 16% for FY2027-28. The upgrade incorporates updated global LME aluminium and alumina price forecasts. The brokerage values NALCO at 7x FY27E EV/EBITDA, supported by its strong balance sheet and stable-to-improving aluminium price outlook.

HSBC highlighted improvements in NALCO's operating model, including:

• Start of captive coal mining operations
• Expected commencement of new captive bauxite mine
• Limited downside risk to alumina prices at current levels

Commodity Outlook and Market Performance

HSBC's optimistic stance reflects expectations of tight aluminium supply conditions, where any pickup in demand is likely to push prices higher. The brokerage raised its CY2026 and CY2027 LME aluminium price assumptions by around 16% and 14% to $3,200.00 per tonne and $3,250.00 per tonne, respectively, from previous forecasts of $2,750.00 and $2,850.00 per tonne.

The brokerage expects safe-haven metals and those with high exposure to energy-transition demand to continue outperforming metals with traditional demand exposure. HSBC has raised price forecasts for most metals on expectations of resilient demand, constrained supply, and a weaker US dollar, with platinum, copper, rhodium, and now aluminium as preferred metals.

In Monday's trading session, the upgraded stocks responded positively to HSBC's recommendations. Hindustan Zinc shares rallied over 4% to ₹663.00, Hindalco rose over 1% to ₹947.00, while NALCO gained nearly 2% to ₹376.00 on the BSE.