Tata Steel, Coal India, JSW Steel and ONGC are among half of Nifty stocks that are trading at a steep discount to their 10-year valuation averages. This is even as the NSE barometer has climbed nearly 12 per cent in the last six months. While many of these stocks have healthy average price targets, a few have flattish targets that suggest the stocks are trading priced-to-perfection.
The steepest discount for Nifty consistent is seen on refiner ONGC, whose shares traded at 2.3 times trailing 12-month EPS, as of October 31, a 73 per cent discount to its historical average of 8.4 times. The stock has an average target price of Rs 173.71, suggesting a 25.24 per cent potential upside. This is as per publicly available data with Trendlyne.
Tata Steel shares traded at a 64 per cent discount at 6.9 times (October-end) against a 10-year average PE of 19.1 times. The average brokerage target, as per Trendlyne, stands at Rs 105.43 on the stock that suggests a 1.2 per cent potential downside for the stock.
Coal India traded at a 38 per cent discount to its historical average while JSW Steel and Dr Reddy’s Labs traded at discounts of 38 per cent and 26 per cent, respectively. This was on a trailing PE basis. Coal India’s price target suggests a mere 5 per cent potential upside; JSW Steel’s price target suggests a 21 per cent potential upside. Dr Reddy’s Lab’s price target, meanwhile suggests a 14 per cent upside potential.
Among sectors, private lenders such as IndusInd Bank, HDFC Bank and ICICI Bank traded at up to 47 per cent discount to their trailing 12-month price-to-book value. PSU SBI, NBFC HDFC and life insurer HDFC Life traded at up to 31 per cent discount to their historical valuations.
IndusInd Bank’s price target suggests a 14 per cent upside, HDFC Bank 21 per cent, ICICI Bank 10 per cent, SBI 7per cent, HDFC 19 per cent and HDFC Life 25 per cent.
FMCG major ITC traded at a PE of 21.4, down 13 per cent from its its 10-year average of 24.6, suggests Motilal Oswal’s monthly Bulls & Bears report.
Healthcare stocks Apollo Hospitals, Sun Pharma and Cipla; and aluminium maker Hindalco are a few other stocs that trade at a discount to historical averages.
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