APL Apollo Tubes Ltd., Star Cement Ltd., Nuvoco Vistas Corp. Ltd., Supreme Industries Ltd. and Dalmia Bharat Ltd. are among a group of stocks that now trade below their five-year average valuation multiples despite retaining strong analyst support.
Analysts tracked by Bloomberg see upside of as much as 35.9% in some of these stocks, even after a broad market selloff that began on Feb. 27 – since the US-Iran conflict began.
An NDTV Profit analysis of Bloomberg data covering companies tracked by at least 10 analysts found several stocks that moved from trading at steep premiums to their historical valuations to trading below their long-term averages.
The shift comes as Indian equities continue to trade below levels seen before the Iran conflict began. The Sensex and Nifty fell as much as 13% by the end of March and have yet to recover their Feb. 27 levels. Higher crude oil prices, inflation concerns, foreign investor outflows and pressure on the rupee weighed on sentiment during the period. Brent crude rose as high as $120 a barrel during the conflict, prompting investors to reassess valuations across sectors.
ALSO READ: Bullish On Adani Ports; Hindalco, JSW Steel, Mankind Pharma; CarTrade On Brokerage Radar
Analysts Still Back These Stocks
Star Cement stands out among the screened companies. The stock trades below its five-year average valuation, carries buy ratings from 87.5% of analysts tracked by Bloomberg and offers implied upside of 35.9%.
Dalmia Bharat also trades below its historical average valuation. Analysts see upside of 26.6%, while 65% of those tracked by Bloomberg recommend buying the stock.
APL Apollo has buy ratings from 90.5% of analysts and implied upside of 23.4%. Supreme Industries carries buy ratings from 90% of analysts, with return potential of 22.6%.
Nuvoco Vistas trades below its five-year average valuation after one of the sharpest reratings in the group. Analysts continue to see upside of 21.2%, while 79.2% recommend buying the stock.
ALSO READ: Can India Attract More Global Capital? PM Modi, Citi CEO Jane Fraser Discuss The Road Ahead
From Premium To Discount
Several of the stocks traded at steep premiums to their historical valuations before the market selloff.
Prestige Estates Projects Ltd. traded at nearly 290% above its five-year average price-to-earnings multiple on Feb. 27. By June 4, that premium had narrowed to about 113%. Analysts see upside of 33.6%, while 78.6% recommend buying the stock.
JSW Steel Ltd. traded at 88.1 times earnings on Feb. 27, nearly 279% above its five-year average multiple of 31.5 times. By June 4, the stock traded at 14.4 times earnings, below its historical average. The stock has buy ratings from 73.7% of analysts, though implied upside stands at 3.8%.
Indian Oil Corp. Ltd. traded at 19 times earnings on Feb. 27, around 249% above its five-year average valuation. By June 4, the stock traded at 4.5 times earnings, below its historical average. More than half the analysts tracked by Bloomberg recommend buying the stock, with consensus upside of 12.1%.
ALSO READ: ‘Won’t Pull Out A Single Dollar’: Norges Bank Reaffirms Faith In India Amid Record FPI Exodus
Ramco Cements Ltd., Navin Fluorine International Ltd., Bharat Heavy Electricals Ltd. and APL Apollo also recorded some of the largest declines in valuation premiums relative to their own historical averages.
While not every stock has retained strong analyst conviction, several names that have moved from trading at significant premiums to below their historical valuation averages continue to attract buy recommendations and double-digit upside estimates from analysts.
Catch all the live updates on stock markets here.
Essential Business Intelligence,
Continuous LIVE TV,
Sharp Market Insights,
Practical Personal Finance Advice and
Latest Stories — On NDTV Profit.
