Tata Steel, ONGC, Coal India, JSW Steel, DRL: Over half of Nifty stocks at steep discount to 10-year averages
With the market seeing a 3 per cent drop in the last one month, more than half of Nifty50 stocks are trading at discount to their historical averages. Price targets on many of these stocks suggest up to 30 per cent potential upside going ahead.
In the Nifty pack, Tata Steel traded at the steepest discount over its 10-year average, data compiled by Motilal Oswal Securities suggest. The stock traded at a PE of 7.3 times as on December 30, which was at 61 per cent discount over a 10-year average of 18.9 times. Jefferies has turned positive on this stock and has suggested a 12-month target of Rs 150. ICICIdirect sees the stock at Rs 127. The two targets suggests up to 30 per cent potential upside on the Tata group firm over Wednesday’s closing price of Rs 115.45.
ONGC (59 per cent), Coal India (44 per cent), JSW Steel (36 per cent) and Dr Reddy’s Laboratories (30 per cent) were some other Nifty stocks that traded at steep discount to historical averages.
In case of ONGC, the 12-month trailing PE multiple at 3.4 times, as of December 30, was at 59 per cent discount to its historical average of 8.4 times. The oil & gas sector, on the other hand, traded at a P/E ratio of 13.2 times against the historical average of 12.2 times. ONGC has an average target price of Rs 174.17, as per publicly available data with Trendlyne, suggesting a 19 per cent potential upside.
Coal India shares traded at a 44 per cent discount at 6.2 times (December-end) against a 10-year average PE of 11.1 times. Metals, as a sector was trading at an EV/Ebitda ratio of 4.8 times, which was at 27 per cent discount to its 10-year historical average of 6.6 times. The average brokerage target on Coal India, as per Trendlyne, stands at Rs 276.12, which suggests a 27.16 per cent potential upside for the stock.
For JSW Steel, the discount stood at 36 per cent. This stock traded at 7.5 times its trailing 12-month EPS against a 10-year average of 11.6 times. JSW Steel’s average target price at Rs 592.14 suggests a 20 per cent potential downside.
For Dr Reddy’s Laboratories, the discount stood at 30 per cent. This stock traded at 18.2 times against the historical average of 26.1 times. Dr Reddy’s Laboratories’ average target price at Rs 5,108 suggests a 20 per cent potential upside.
Apollo Hospitals (29 per cent), UPL (25 per cent), ITC (18 per cent discount), Maruti Suzuki (18 per cent) and HDFC Life (16 per cent) are some other Nifty stocks that traded at steep discounts to historical averages. The average target for Apollo Hospitals suggests 18 per cent upside potential, UPL’s target suggests 30 per cent potential upside, ITC’s 14 per cent potential upside while Maruti Suzuki and HDFC Life have price targets that suggest 13 per cent upside potential on each of the counters.
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