Eyeing worst-performing Nifty stocks? Wait, analyst targets show little prospects

Despite this underperformance, the 12-month median price targets for most of these scrips either suggest modest return potential or further downside.

A median of 47 analysts tracking Maruti Suzuki shows just 5.6 per cent upside, despite a 6.4 per cent drop in the stock year to date. Price targets for Kotak Mahindra Bank and Nestle India suggest 6 per cent potential downside. HDFC Life’s median target suggests 7.6 per cent upside.

Three of the seven stocks have 12-month price targets showing 10-12 per cent upside potential. Hero Motocorp’s median price target of 43 analysts suggests 12 per cent potential upside, even when the stock is down 8 per cent year to date. HDFC’s price target suggests 12 per cent upside and Dr Reddy’s Labs’ 10 per cent.

Nirmal Bang is cautious on Hero MotoCorp and prefers Bajaj Auto and TVS Motor in the two-wheeler space. It is also cautious on Maruti Suzuki.

Hero MotoCorp reported a 25.9 per cent dip in September sales at 5,30,346 units, though the numbers were better than what analysts had estimated. Maruti Suzuki’s sales, on the other hand, fell 46 per cent in September.

“As a result of the shortage of components, the decline was more prominent in the mid-sized and compact segments, which showed 54 per cent drop each on a MoM basis, while the decline in other PV segments was slightly lower than that,” said brokerage Angel One.

Nirmal Bang said while the underlying demand drivers remain strong, prolonged chip shortage is likely to affect festival stocking.

Anand Rathi is positive on HDFC Life, given its growth, strong distribution network and market-leading position. But it has initiated coverage on the stock last week with a ‘hold’ recommendation and a target price of Rs 786. It counts change in regulations, adverse economic events and change in persistency as key risks for the stock.

In the case of Nestle India, its Chairman and MD Suresh Narayanan recently said that 2022 will likely be a “difficult year” as commodity prices are expected to rise and result in the spectre of food inflation for the manufacturers. In the last four quarters, the FMCG major has surprised the Street negatively three times and has seen three downgrades and one upgrade. The stock still trades at a premium to its historical averages on parameters such as price-to-sales and PE multiples.

In the case of Kotak Mahindra Bank, the scrip trades at 12-15 per cent premium over its five-year average price-to-sales and forward PE multiples. Even the most bullish target for this stock at Rs 2,200 suggests 10 per cent upside.

HDFC’s numbers were better-than-expectations in the previous four quarters and about 21 analysts have ‘strong buy’ recommendations on the stock. Analysts are largely positive on this stock.

Meanwhile, in the case of Dr Reddy’s Labs, Ambit Capital believes the drugmaker is well-placed to navigate the elevated pricing pressure in the US given improving performance of non-US businesses, especially India. It said Dr Reddy’s has a leaner cost structure than before as well as limited concentration risk in base earnings and growth.