TCS, Trent among 5 Nifty stocks at 20-35% discount to historical valuations; worth a look?

Five Nifty constituents namely Apollo Hospitals, Bharti Airtel Ltd, Tata Consultancy Services Ltd (TCS), Trent Ltd and Asian Paints are quoting up to 35 per cent discount to their 10-year valuation multiples. Four of these five stocks are a consensus 'Buy', data showed.

Thanks to concerns around emerging Genetic-AI and its impact on IT demand, shares of Tata group flagship TCS have seen derating of late. At present, TCS quoted at 17.1 times, a 30 per cent discount to its 10-year average of 24.5 times.  A total of 17 of 44 analyst calls on the stock suggest 'Strong Buy', while 12 others suggest 'Buy'. There are five 'Sell' or 'Strong Sell' recommendations on TCS.  

"We reiterate our Outperform rating on TCS with 29 per cent upside and very strong support from a 6 per cent FCF yield. We build-in an Rs 35 dividend in 4Q and there could be a possibility of share buyback over the next few quarters given recent changes in the budget around favourable tax treatment for share buybacks," CLSA in a note last week. 

Another Tata group stock Trent is trading at 72.4 times its trailing 12-month earnings, a 26 per cent discount to its 10-year average of 98.1 times, as per MOFSL.   

Bharti Airtel quoting at 30.2 times is at 33 per cent discount to 10-year average of 45.2 times, while Asian Paints trading at 45.3 times is at 21 per cent discount to its long-term average of 57.7 times.  Out of 33 recent calls on Bharti Airtel, 29 were 'Buy' or 'Strong Buy'. 

"Post the recent correction, Bharti's India business now trades at an implied valuation of 10 times FY28 Ebitda, on our estimates. We reiterate our Buy rating on Bharti with an unchanged SoTP-based target of Rs 2,355 (bull case: Rs 2,875; bear case: Rs 1,810)," MOFSL said.

Asian Paints is a consensus 'Hold, with 22 of 36 recent calls either 'Hold' or 'Sell'.  The paints maker delivered an underwhelming December quarter, with topline coming in below analyst expectations, due to slower growth in the decorative segment. Elara Securities has a 'Sell' rating on the stock.

Apollo Hospitals traded at a price-to-earnings (PE) multiple of 50.7 times, which is at 35 per cent discount to its 10-year valuation average of 78.1 times. There are 21 'Strong Buy' calls, four 'Buy' recommendations, three hold and one 'strong Sell' recommendation of the stock, as per data publicly available with Trendlyne. 

PL Capital in a note today said it sees companies across FMCG and healthcare sectors, including Apollo Hospitals, achieving double-digit growth going ahead.