This week, we take a look at five analyst picks trading in the PE Buy Zone (a stock is in the PE Buy Zone if it is trading at a PE lower than its historical PE average). These stock picks also have PE TTM lower than their respective industry, as well as revenue and profit growth of more than 10% YoY.

1. Chalet Hotels: IDBI Capital maintains its ‘Buy’ rating on this hotel chain with a target price of Rs 457, implying an upside of 9.2%. The company is trading in the PE Buy zone and its current PE TTM is lower than the hotel industry’s PE average. Over the past year the company has gained 45.5%. 

In Q4FY23, Chalet posted a net profit of Rs 39.3 crore, an improvement compared to a loss of Rs 11.6 crore in Q4FY22. Its revenue has also jumped 128.3% YoY.  

Analyst Archana Gude states that the firm beat her estimates on various key parameters and “the company continued its robust operational performance in Q4FY23 as well, which resulted in highest-ever quarterly net sales and best ever margins”. The analyst believes that the company’s foray into the leisure segment by acquiring Dukes Retreat, Lonalvla, is encouraging, as it will add inventory, particularly in an industry facing rising demand and supply shortages.

The analyst believes that the hotel is well-placed to benefit from the growing demand for corporate travel in the near  term. She anticipates the company’s revenue to grow at a CAGR of 21.5% over FY23-25. 

2. Equitas Small Finance Bank: ICICI Securities keeps its ‘Buy’ rating on this bank and increases its target price to Rs 100 from Rs 70. This implies an upside of 27.1%. The stock is trading in the PE Buy zone, and its current PE TTM is lower than the banking industry’s average. Over the past year the stock rose by 44.2%.
   
   In Q4FY23, the bank’s net profit rose 59% YoY to Rs 190 crore and revenue grew by 29%. Analysts Renish Bhuva, Jai Prakash Mundhra and Chintan Shah attribute the bank's profitability growth to a sustained rise in advances, stable NIMs, and a decline in the cost/income ratio. They believe that continued investments towards building capabilities and new product launches have aided growth momentum. They add, “Disbursements in its newly launched products (e.g. affordable housing,  used car financing, etc) continue to gain momentum”.
   
   Bhuva, Mundhra and Shah highlight that the bank’s asset quality has improved on the back of slippages moderating sharply in Q4. They are also optimistic about the bank’s ability to maintain its credit cost within its guided range of 1.2%-1.25% in FY24. The analysts expect the bank’s net profit to grow at a CAGR of 42.1% over FY23-25.  

3. Craftsman Automation: Motilal Oswal reiterates its ‘Buy’ call on this auto parts manufacturer with a target price of Rs 3,950, indicating an upside of 12.8%. The company is currently trading in the PE Buy Zone, and its PE TTM is lower than the auto parts and equipment industry’s average. Its price changed by 59.9% in the past year.
   
   In Q4FY23, Craftsman Automation’s profit grew by 50.9% YoY to Rs 77.7 crore, and revenue increased 49.1% YoY. According to analysts Jinesh Gandhi, Amber Shukla and Aniket Desai, the company’s growth has been driven by the auto powertrain, Al products and Industrials & storage segments.

The analysts say, “Craftsman’s track record of creating and gaining market leadership organically is uncommon in the auto component industry.” They believe that this has enabled it to deliver a good balance of strong growth and superior capital efficiency. The analysts expect growth in the aluminum division and industrials to drive overall growth in FY24/25. They estimate consolidated revenue and profit CAGR of 27% and 37%, respectively, for FY24-25.

4. Mahanagar Gas: ICICI Direct maintains its ‘Buy’ call on this utilities provider with a target price of Rs 1,300, indicating an upside of 22.5%. The company is currently trading in its PE Buy Zone, and its PE TTM is lower than the non-electrical utilities industry average. Its price rose by 44.5% in the past year.
   
   In Q4FY23, Mahanagar Gas’s net profit increased by 103.9% YoY to Rs 268.8 crore and its revenue grew by 35.8% YoY to Rs 1,644.1 crore (in line with the brokerage’s estimate). 

Harshal Mehta and Payal Shah note that the company has passed on the benefits of revised APM gas prices to its customers  while still maintaining profitability. In Q1FY24, spot LNG prices have further softened. Owing to these reasons the analysts say, “growth in sales volume will be a key factor to monitor, going ahead.” 

Mehta and Shah remain positive as they believe Mahanagar Gas will benefit from India’s aim to increase the share of natural gas in the energy mix from 6% to 15% by 2030, and also due to the company’s debt-free balance sheet and consistent dividend payout.

5. DCB Bank: Axis Securities maintains its 'Buy' rating on this bank with a target price of Rs 140, indicating an upside of 20.5%. The company is currently trading in the PE Buy Zone, and its PE TTM is lower than that of the banking industry. Its price rose by 39.1% in the past year. In Q4FY23, DCB Bank's operating revenue increased by 28.19% YoY to Rs 1,179.28 crore, and its net profit grew by 25.36% YoY to Rs 142.21 crore.

According to analysts Dnyanada Vaidya, Prathamesh Sawant, and Bhavya Shah, DCB Bank will sustain its growth momentum as it looks to double its balance sheet in the next four years. They believe the bank is on track to deliver a 1% RoA and an RoE of 11-13% over the medium term.

The analysts expect advances growth of 18% CAGR over FY24-25 due to strong traction in disbursements with continuous sequential growth. They opine that the stock currently trades at attractive valuations as the bank aims to double its balance sheet to Rs 1 trillion in four years.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)