Bharat Electronics Ltd (BEL), NTPC Ltd, Power Grid Corporation of India Ltd (Power Grid), Tech Mahindra Ltd and Grasim Industries Ltd are among two-third of Nifty stocks that are trading at steep premiums over their 10-year historical PE averages. Analysts, however, have neutral to positive views on these five stocks.
At 37.8 times, Bharat Electronics trades at 234 per cent premium to its 10-year average PE of 11.3 times. The stock is up 61 per cent in 2024 so far.
"We reiterate our positive outlook on BEL given the government's thrust in domestic manufacturing, increasing electronics share in defence, its market leadership position, a strong order backlog, and healthy margin profile. We value BEL at P/E to 42 times on FY26E EPS and maintain upgrade to 'Buy' from 'Hold' rating with a target price of Rs 323," said Geojit Financial Services.
Power Grid at 17 times EPS trades at 81 per cent premium over its long-term average PE of 9.1 times. This PSU utility stock is up 31 per cent year-to-date. Among largecap stocks, MOFSL has preference for Power Grid. It also likes ICICI Bank, HDFC Bank, L&T, HCL Technologies, Hindustan Unilever (HUL), Mahindra & Mahindra (M&M), Titan Company Ltd and Bharti Airtel among largecaps.
At 27.4 times, Grasim Industries trades at 87 premium over its 10-year average PE of 14.6 times. This stock is up 21 per cent in 2024 so far. MOFSL said Grasim's net debt to peak out in FY25 as the core businesses start to recover in 2HFY25 and its initial capex commitment of Rs 10,000 crore in paint business ends by FY25-end. It suggested a target price of Rs 3,270 on the counter.
NTPC at 17 times EPS commands a 79 per cent premium over its 10-year PE average of 9.1 times, thanks to a 30 per cent rise in 2024 YTD and 69 per cent jump in the past one year. NTPC's September quarter Ebitda fell 8 per cent year-on-year (YoY) and was short of analyst expectations, thanks to a sharp rise in other opex. Post its Q2 results, a few analysts are neutral-to-positive on NTPC shares. They noted that the focus on renewable energy (RE) continued with the NTPC group adding 485 MW of commercial RE capacity in H1FY25, with 90 MW attributable to NTPC itself and 395 MW to the group companies.
At 28.2 times, Tech Mahindra also trade at 58 per cent premium over 10-year average PE of 17.8 times. Axis Securities said Tech Mahindra appears to be effectively addressing client-specific engagement issues across multiple verticals, while maintaining a strong deal pipeline. The company believes that its new strategy will support a quicker recovery, enhancing confidence in near-term growth.