Deep pockets for EV wars: 5 auto stocks with upside potential of up to 52%

If one looks at reasons for the out-performance of stocks like TVS motors and Tata motors, a large part of it can be attributed to their moving early into EV space. Now let’s go back a couple of years. What dominated the headlines was the XYZ startup focused on EV space has become a unicorn because it has raised US $ 20 million at such and such valuations. Here we need to make a distinction between the total amount raised which will go into operation of the company and the valuations. The total amount which is real business is just Rs 150 crore, though the valuation has crossed more than a US $ one billion dollar. Valuations don't run business, they only get headlines. It is cash which a company will be able to pour into EV business and price wars which are bound to take place in the long term which will decide the final winner.

While there are clear signs of large cap stocks making a comeback on the street, it is reflected both in movement of Nifty sensex. The problem is that as a word the “large cap” is so open ended and we keep seeing stocks moving in and out of that category which are the ones which one should focus on. If one looks at the last six months of the stock market moves, a new industrial house appears to be born and has caught the fancy of the street. Yes, we are talking about PSU as a set of companies. It is not owned by one individual but by the government of India so there is an element of the largest shareholder being one entity and that is why it may be called a new industrial house. Beside the ownership another common thread running in these companies is the impact of the clean up and restructuring of policy framework which has come in different sectors and in these companies in particular. So there is high probability and yes only high probability of these stocks doing relatively better in stormy conditions on the street.

Nifty IT index is probably among very few sectoral indices which are still below the high they had touched in October 2021. Yes, the sector has some headwinds which not many had thought would appear two years back. But the bigger question is whether this phase of underperformance is about to get over or not. It might be too early to say as short term performance could be many reasons, but the way stocks have reacted to bad news and see sharp upward movement with slightly positive news, it might be worth bringing them back on watch list and shed the bias of looking at all IT stocks with a coloured lens. Stock Reports Plus, powered by Refinitiv, is a comprehensive research report that evaluates five key components of 4,000+ listed stocks - earnings, fundamentals, relative valuation, risk and price momentum to generate standardized scores.

On a day when the majority of the stocks are trading with a cut, one set of stocks which have been able to log in gains has been from a space which cannot be very clearly defined. The reason, what would you call a company which makes both, water geysers , and electrical wires, a white goods or electrical goods company.From the year 2015 to 2020, companies with strong brands in different sectors which were considered as commodity plays got re-rated by the street. The expansion in price earnings multiples of these companies led to big wealth creation.For the last more close to four years, with some more companies getting listed in the same sector and some headwinds emerging we saw these companies consolidating between a very broad range. Is the phase of valuation readjustment over, probably a time to get them on the watch list.

With the focus of government policies increasingly turning favourable toward the manufacturing sector, some of the capital goods and engineering companies are making a comeback on the analysts list.

There has been a catch up by the large cap in the last three weeks, but given the fact that valuation of mid-caps have also increased the valuation differential which is key behind the possible mean reversion trade is still valid . Given the fact that the differential between, mid and large cap stocks has increased very sharply in the last one year, if the market remains under the control of bulls there is a probability that over the next few quarters markets may see a mean reversion. ET screener powered by Refinitiv’s Stock Report Plus lists down quality stocks with high upside potential over the next 12 months, having an average recommendation rating of “buy” or strong buy . The screener applies different algorithms for all BSE and NSE stocks.

Valuation markdowns of unicorn startups continue through 2023, with both Swiggy and Byju’s investors marking down the value of their holdings by 25% and 48%, respectively.

As the large auto companies make a comeback, even the auto ancillary stocks are coming back on the attention list. We take a look at companies where analysts are projecting further upside in the next 12 months. The list is based on upside estimated by the analysts, with the highest potential stock coming on the top of the list.

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