November 20, 2024
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Stock Market

5 stocks with PE below industry to buy now for an upside of more than 20%

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Stock Market

5 stocks with PE below industry to buy now for an upside of more than 20%

Amid market volatility, select large-cap stocks trading below industry P/E ratios present compelling opportunities for value investors. These undervalued giants, with strong fundamentals and robust business models, offer potential upside of over 20%. Such pricing inefficiencies in market leaders suggest possible sector-wide revaluation, benefiting patient investors seeking quality at a discount.

1. Tata Motors Limited

Founded in 1945 and headquartered in Mumbai, Tata Motors Limited is India’s largest automobile manufacturer and a significant global automotive player under the Tata Group. The company offers a broad range of vehicles, from passenger cars and trucks to electric vehicles (EVs), addressing both the commercial and consumer markets.

Tata Motors’ acquisition of Jaguar Land Rover and Tata Daewoo has expanded its luxury and commercial vehicle segments worldwide. With manufacturing units in India, the UK, South Korea, and Thailand, Tata Motors is emphasising electric mobility with a growing EV lineup to meet global sustainable transportation demands.

ICICI Direct rates Tata Motors as a “BUY”, setting a target price of ₹1,000 with an expected upside of 29.15%. The rationale focuses on Tata Motors efforts to consolidate its domestic business with an emphasis on profitability. In the electric vehicle (EV) space, Tata aims to solidify its leadership with new launches. Its overseas luxury brand, Jaguar Land Rover (JLR), has shown recovery in earnings and cash flow, maintaining guidance for net debt-free status by FY25. These factors position Tata Motors favourably for long-term growth amid a strong domestic auto market and expanding EV demand.

With a market capitalisation of Rs. 2,87,835 crores, Tata Motors Limited’s share price closed at Rs. 781 per equity share with a P/E of 8.57.

2. State Bank of India (SBI)

The State Bank of India (SBI), established in 1955 and headquartered in Mumbai, is India’s largest public sector bank and a pillar in the nation’s financial system. Providing a vast range of services, including retail and corporate banking, investment, and insurance, SBI supports individuals, businesses, and government needs.

With an extensive network of branches and ATMs across India and a presence internationally, SBI leads in terms of assets and deposits. Its consistent growth in net profit and asset quality reflects the bank’s solid position and preparedness for future expansion, cementing SBI’s role as a major banking institution in India’s economy.

ICICI Direct assigns a “BUY” rating to SBI with a target price of ₹1,040, implying a 23% upside. The rating is based on SBI’s strong deposit franchise and anticipated 15% credit growth CAGR over FY24-27. The bank’s focus on corporate account deposits and a robust pipeline across segments signal sustained growth. Stable asset quality and steady NIMs at ~3.3% over the coming years reinforce SBI’s position. The bank is also expected to deliver a return on assets above 1%, aligning with management’s strategic growth initiatives and efficient cost management.

With a market capitalisation of Rs. 7,16,111 crores, SBI’s share price closed at Rs.802.40 per equity share with a P/E of 9.97.

3. Oil and Natural Gas Corporation (ONGC)

Established in 1956 and headquartered in Dehradun, Oil and Natural Gas Corporation (ONGC) is India’s largest oil and gas exploration and production entity. ONGC operates in exploration, production, refining, and transportation, playing a key role in ensuring energy security for the country.

As a state-owned enterprise, ONGC is the backbone of India’s crude oil production and natural gas supply. The company has also ventured into renewable energy projects and continues to focus on improving production efficiency and adopting technologies to reduce environmental impact, strengthening its position as a market leader in India’s energy sector.

Motilal Oswal rates ONGC as a “BUY”, with a target price of ₹330, offering 29% upside potential. ONGC’s growth is driven by expected 11% production volume increases from assets like KG 98/2 and stranded gas monetization. As ONGC capitalises on production improvements, its cost-efficient operations strengthen future earnings prospects. The brokerage expects ONGC to sustain growth with a favourable risk-reward balance.

With a market capitalisation of Rs. 3,12,053 crores, ONGC Limited’s share price closed at Rs. 248.05 per equity share with a P/E of 7.70.