This week we take a look at five analyst picks that are also trading in the PE Buy Zone. The PE buy zone is a useful valuation check - it sees whether the stock trades at its current PE the majority of the time.
If the current PE is unusually low compared to where the stock usually trades, the stock is in the PE buy zone. If the current PE is unusually high for the stock compared to its previous history, it is in the PE sell zone.
- Healthcare Global Enterprises: ICICI Securities maintains its ‘Buy’ rating on this healthcare facilities company with a target price of Rs 339, indicating an upside of 25%. This stock is currently trading in the PE Buy Zone.
Analysts Vinay Bafna and Rohan John are positive on the hospital chain as it focuses on its core competency area of oncology. They believe the firm’s “comfortable debt levels with limited capex plans provide room to explore additional growth opportunities and drive efficiency at the newer hospitals”. The analysts expect revenue from international tourists to increase, as it has hospitals across major cities in India. Revenue from international patients has already jumped to 1.5X of pre-covid levels, added the analysts.
Analysts Bafna and John like the company’s strategy to strengthen its foothold in the oncology hospital space by focusing on acquiring standalone hospitals from tier-2 cities, where the cost of acquisition will be cheaper. HealthCare Global expects its newly acquired hospitals to be operational in 18-24 months, they added. The analysts expect the company’s net profit to grow at a CAGR of 29.2% over FY22-24.
- Home First Finance Company India: Motilal Oswal initiates coverage on this housing finance company with a ‘Buy’ rating and a target price of Rs 1,020. This indicates an upside of 16.6%. The stock is currently trading in the PE Buy Zone.
Analysts Abhijit Tibrewal and Nitin Agarwal expect the company’s assets under management (AUM) to grow on the back of its rising disbursements, co-lending partnerships and diverse marketing channel. The analysts added, “Home First’s first mover advantage in technology along with its strategic digital partnerships has resulted in robust underwriting, quicker turnaround and superior asset quality”.
The analysts believe the company is well placed to mitigate a potential margin compression given its cost efficiencies. They also anticipate the asset quality to remain stable and healthy as its net non-performing assets stood at 1.8% in FY22. Analysts Tibrewal and Agarwal expect Home First Finance’s AUM and net profit to grow at a CAGR of 29% and 24%, respectively, over FY22-25.
- Narayana Hrudayalaya: Prabhudas Lilladher maintains a ‘Buy’ rating on this healthcare facilities company with a target price of Rs 810, indicating an upside of 14.8%. The stock is currently trading in the PE Buy Zone.
Narayana Hrudayalaya inked an agreement with Shiva and Shiva Orthopaedic Hospital to acquire its orthopedic and trauma hospital (Sparsh unit) in Bengaluru on a slump sale basis for Rs 280 crore. Param Desai and Sanketa Kohale said, “Though the acquisition looks expensive, it will offer the entire spectrum of services in Health City.” They further added, “Sparsh unit possesses 100 operational beds since a decade, which has generated Rs 49 crore and Rs 18 crore revenues in FY22 and FY23 (4 months) along with healthy profitability.”
The analysts believe that the company’s aggressive capex plans, which include a new Cayman unit, inorganic opportunities and greenfield/ brownfield expansion in India over the next three years will enhance growth visibility beyond FY24. Overall Desai and Kohale expect an EBITDA CAGR of 22% over FY22-24.
- Balkrishna Industries: Hem Securities initiates a ‘Buy’ call on this tyre manufacturer with a target price of Rs 2,293. This indicates an upside of 12.7%. The stock is currently trading in the PE Buy Zone.
The analysts note, “We believe Balkrishna Industries will continue to perform well over the next few quarters due to a robust demand environment.” They also believe that the company's export oriented business model, labor cost benefits and aggressive marketing may help them in outperforming its peers.
“With the help of capex, they are also increasing their capacity which will help them in gaining market share,” the analysts added. The tyre manufacturer is targeting doubling global market share to 10% vs. 5.5-6% currently, and its aggressive marketing and promotional activities are improving brand visibility.
- IIFL Wealth Management: BOB Capital Market maintains a ‘Buy’ call on this financial services company with a target price of Rs 2,277, indicating an upside of 31.8%. The stock is currently trading in the PE Buy Zone.
Mohit Mangal writes, “IIFL Wealth has successfully scaled its annual recurring revenue (ARR) business over the last three years and aims to have 80-85% of its topline from recurring streams,” and he believes this strategy will ensure a favourable asset mix of both debt and equity, and garner traction in the alternative investment space.
This financial services company plans to target Rs 5-25 crore clients due to low competition levels and robust growth in clientele. Mangal remains positive on the stock and concludes, “The company has maintained a niche position in the under-penetrated wealth management business, enjoys a track record of innovative wealth products and has a strong team leader-driven model that boasts of low attrition at both the client and team level.”
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
