Low P/E blue chips: are SBI, Hindustan Zinc and M&M really cheap?

what happened

A low price-to-earnings ratio can draw attention, yet a stock that looks cheap is not always a good buy. A depressed multiple may reflect expectations of slower growth or weakening profits, or it may conceal solid results that the market has not yet recognised. A piece from Moody's, distributed by Equitymaster and republished by Mint, compares three large Indian companies trading at modest multiples: State Bank of India, Hindustan Zinc and Mahindra & Mahindra.

SBI's net profit rose 10.23% year on year to Rs 21,121 crore in the first quarter of FY27, net interest income climbed 14.88% to Rs 46,992 crore, and advances grew 18.63%. The authors also point to the whole-bank net interest margin, which stood at 2.86%. If the cost of deposits climbs faster than what loans earn, the spread shrinks, so strong lending growth alone does not guarantee higher profit.

Hindustan Zinc posted a sharp jump in the second quarter of FY27. Revenue from operations rose 77% to Rs 15,093 crore, net profit surged 142% to Rs 6,412 crore, and Ebitda gained 108% to Rs 9,258 crore, giving an Ebitda margin of 61%. Silver output grew 20% to 173 tonnes. The authors warn that commodity producers can look inexpensive at the peak of the cycle, and that earnings may fall quickly if zinc or silver prices turn lower.

Mahindra & Mahindra relies on two engines, utility vehicles and tractors, which links it both to passenger vehicle demand and to rural incomes. The authors note that a valuation discount to peers does not by itself prove undervaluation, since business mixes, growth rates and profitability differ. Investors should look at segment performance and earnings per share rather than focusing only on vehicle volumes.

why it matters

For investors, a low P/E is only a starting point. The key questions are whether SBI can keep growing its loan book without margin erosion, whether Hindustan Zinc's profits hold up if metal prices fall, and whether M&M's revenue growth turns into higher earnings per share. The article is informational and is not a recommendation to buy any of these shares.

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