As many as 22 Nifty50 companies such as Tata Steel, Coal India, JSW Steel, ONGC and ITC are still trading at up to 65 per cent discount to their historical valuation multiples. Analysts’ price targets for most of these stocks suggest limited or no upside.
At 6.8 times trailing 12-month EPS, Coal India is trading at a 44 per cent discount to its 10-year average PE of 12.2 times. This stock climbed 27 per cent in September and was the best Nifty performer for the month. Following the rally, analysts have a median 12-month price target of Rs 185.91, which suggests a 3 per cent potential downside.
The price target for ONGC signals no upside, thanks to a solid 34 per cent rally in the last one month. A median target of Rs 158.74 on the counter suggests a 1 per cent potential downside. This stock is trading at a PE of 5.9 times, which is at a 37 per cent discount to its 10-year average of 9.3 times.
Pharma names such as Sun Pharma, Dr Reddy’s Labs and Cipla, refiner IOC and utilities Power Grid and NTPC are trading at up to 26 per cent discounts to their 10-year averages.
Sun Pharma, IOC and NTPC’s price targets suggest no upside while Power Grid’s target suggests a small upside. Cipla’s target suggest 15 per cent upside while that for Dr Reddy’s suggests 12 per cent upside.
In the auto sector, Hero MotoCorp is trading at a 19 per cent discount, while Eicher Motors is trading at a 4 per cent discount to historical averages.
The median target for Hero MotoCorp at Rs 3,202.41 suggests a 12.7 per cent potential upside. Eicher Motors’ median target suggests a 3 per cent potential downside.
Analysts said a semiconductor shortage hurt supplies for personal vehicles, premium two-wheelers, and light commercial vehicles (LCVs), which will potentially impact sales volumes in the forthcoming festive season.
In banking, IndusInd Bank is trading at 1.7 times price-to-book value, 37 per cent lower than the long-term average of 2.7 times. In the FMCG sector, ITC’s PE at 17.8 times is ruling at a 30 per cent discount to the 10-year average of 25.4 times.
IndusInd’s target price of Rs 1,147.11 suggests no upside while ITC’s median target of Rs 258.97 suggests an 11 per cent upside.
JSW Steel is trading at 7.3 times trailing 12-month EPS, a 40 per cent discount to its 10-year average of 12.2 times. A median target of Rs 753.48, based on 29 analyst calls, suggest a 13 per cent upside.