9 Nifty stocks 100-340% down from peak prices: Should you buy?

NEW DELHI: Equity benchmark Nifty might have made an all-time high at 12,948 this week, but hitting such record levels seems like a distant dream for nine index stocks, which need to gain 100-338 per cent to revisit their previous peaks.

Many of these stocks are on analysts’ ‘buy’ list, though none of them promises to make fresh highs for now, if one were go by analyst targets.

ONGC: This stock settled at Rs 71.90 on Wednesday and needs a 338 per cent rally to revisit its all-time high of Rs 314 hit on June 9, 2014. BoB Capital Markets said the stock’s underperformance despite the recent rise in oil prices provides valuation comfort, especially amid the decline in operating costs.

“As oil prices remain strong, we find the risk-reward favourable and upgrade the earnings estimates. As cash flows improve amid a decline in leverage, we see a strong probability of either higher dividend payout or share buyback going forward,” the brokerage said. It suggested a price target of Rs 104 on the stock. Edelweiss has a price target of Rs 100. Motilal Oswal Securities sees the stock at Rs 90 while IDBI Capital has a target of Rs 85.

Coal India: Coal India requires a 270 per cent rally to hit the August 2015 high of Rs 447. This stock is a ‘buy’ for Emkay Global, but with a lower target price of Rs 180 against Rs 208 earlier amid concerns over low e-auction premiums.

Taking cognisance of lower cash accretion, Edelweiss has cut its price target for Coal India to Rs 155 from Rs 165.
The stock closed at Rs 120.75 on Wednesday. “Realisations from e-auction and volume growth have been under pressure on account of a decline in power demand and significant stocks at both mines and power plants. However, power demand has shown signs of improvement, and we expect volumes to recover in 2HFY21,” Motilal Oswal said and recommended a price target of Rs 192 on the stock.

Tata Motors: The stock needs a 249 per cent rise over its Wednesday’s price to revisit the February 2015 high of Rs 605 apiece. HDFC Securities last week upgraded the stock to ‘Buy’ rating from ‘Add’, as it expects the OEM to benefit from improving demand outlook, cost-cutting initiatives and better FCF generation. “JLR’s retail volumes are improving from Covid lows, and system inventories are normalising,” it said and recommended a price target of Rs 175 on the stock. Phillip Capital said the company has turned the corner and the worst is behind it. This brokerage has a price target of Rs 167 on the stock. The stock traded at Rs 173 on Wednesday, suggesting muted upside potential.

NTPC: NTPC needs a 174 per cent gain to reach its March January 2008 high. Analysts have a ‘strong buy’ recommendation on the stock. In a recent note, IIFL said NTPC valuations are very undemanding at 0.7 times FY21E PBV and it comes with an attractive dividend yield of 6.4 per cent. “The regulated RoE of 15.5 per cent till FY24E and commercialisation of capacities provide good earnings visibility and will lend support to the stock price,” it said. Kotak Securities finds the fair value of the stock at Rs 125. The stock closed at Rs 88.30 on Wednesday.

IndianOil: IOC requires a 172 per cent jump to hit the August 2017 high. JP Morgan has March 2021 price target of Rs 140 on the stock, while UBS’s 12-month target stands at Rs 130 and Prabhudas Lilladher’s at Rs 118. IOC hit a record high of Rs 231.47 on August 31 2017, as per corporate database AceEquity.

Nirmal Bang’s buy call on IOC is based on improved outlook for retail margins, a likely recovery in refining and petchem margins in next 1-2 years due to likely closure of capacities and compelling valuation after a sharp 45 per cent drop in the stock price in last one year, which has priced in worries over margins and the likely risk of rising competition from private retailers/alternative fuels.

IndusInd Bank: At Rs 828, shares of IndusInd Bank are trading higher than JM Financial’s price target for the stock at Rs 750, Nomura’s target of Rs 725 and Edelweiss’ target of Rs 665. Up 125 per cent in the last six months, this stock is still down 45 per cent year to date. Edelweiss said concerns over asset quality will dominate IndusInd’s core business momentum gains in the foreseeable future. “Demonstration of the merger value-add and getting through the current crisis without earnings erosion thereof are key,” it said.

Sun Pharma: ICICI Securities has a ‘buy’ rating on the stock with a price target of Rs 610. Prabhudas Lilladher sees the stock at Rs 597, JPMorgan at Rs 600, JM Financial at Rs 770 and Macquarie at Rs 620. The stock has 32 ‘buy’, 2 ‘hold’ and 5 ‘sell’ ratings.

Emkay Global said while the company management has indicated that the reduction in sales and promotional expenses is not structural, it expects the Ebitda margin to remain at around 25 per cent in the near term, as other expenses are likely to moderate in third and possibly fourth quarters. This brokerage has a price target of Rs 560 on the stock. Specialty sales growth, Halol plant resolution and recovery in the branded markets are seen as key driver for the Sun Pharma stock, analysts said.

GAIL: Prabhudas Lilladher expects GAIL’s capex trajectory to pick up as all businesses (excluding pipeline) operate at near-peak levels. A weak commodity price outlook amid uncertain demand recovery remains a key risk, it said and suggested a price target of Rs 108 on the stock. IDBI Capital has a price target of Rs 109 on the stock while JM Financial sees it at Rs 125.

“Given the weakness in share price, the prevailing market price is implying zero value for its gas trading and petchem/LPG businesses due to low earnings visibility. “Hence, we maintain a buy rating as the valuation provides a margin of safety,” JM Financial said.

ITC: Antique, IIFL, Elara, Jefferies, Kotak Institutional Equities and CLSA, among others, have ‘buy’ ratings on the stock with price targets ranging from Rs 235 to Rs 273. At 14.5 times FY22 earnings, the stock valuation appears to be compelling while a higher payout implies an attractive 5 per cent dividend yield, Jefferies said and maintained a price target of Rs 265 on the stock.

Geojit expects an improvement across ITC’s verticals in the months ahead. “However, the pace of pickup in volumes and demand remains crucial,” it said as it valued the stock at Rs 217.