This week, we look at stocks trading in the PE ‘Buy’ zone, as identified by analysts. These stocks are in the 'Buy' zone if their current PE is low compared to the range they have historically traded in.

1. Affle (India):

Axis Direct maintains its ‘Buy’ recommendation on this internet software & services company with a target price of Rs 1,350, indicating an upside of 21.6%. The stock is currently trading in the PE Buy Zone. In Q3FY24, the company’s net profit improved by 11.4% YoY to Rs 76.8 crore, while its revenue increased by 29.6% YoY to Rs 508.9 crore. Analyst Omkar Tanksale believes that the company’s EBITDA improvement was led by a sharp recovery in its international business. 

Tanksale says, “From a long-term perspective, Affle has strong device and client additions. We also believe that the company has superior penetration in the international business and strong revenue growth potential going ahead.” The management is confident that demand will increase in the medium-term due to deals secured in previous quarters. The analyst expects margin improvement and forecasts net sales and profit of Rs 2,118 crore and Rs 599 crore for FY24. 

2. Lemon Tree Hotels:

HDFC Securities maintains a 'Buy' rating on this hotel company with a target price of Rs 152, indicating an upside of 15.2%. The stock is currently trading in the PE Buy Zone. In Q3FY24, the company's revenue improved by 24.3% YoY to Rs 290.9 crore, though net profit dipped by 11.4% YoY to Rs 35.4 crore. Analyst Amit Kumar attributes the profit decline to lower occupancy at Aurika, Mumbai, (opened in October 2023) and ongoing renovations in the Keys portfolio. 

Despite a drop in occupancy by 163 bps YoY to 65.9%, Kumar remains positive due to a 10% growth in average room rate (ARR). He expects the company to reduce its Rs 1,950 crore debt periodically to become debt-free in the next four years. 

Kumar says, “Lemon Tree has a strong expansion plan to build a portfolio of 13,433 rooms in 155 hotels by FY27.” He sees growth in ARR from renovations in the Keys portfolio and increased occupancy at Aurika as key growth drivers. He expects an EBITDA CAGR of 20%, supported by an increase in occupancy to 73-75% over FY24-26.

3. Manappuram Finance:

Motilal Oswal maintains its ‘Buy’ call on this finance company with a target price of Rs 230, indicating an upside of 31.4%. The stock is currently trading in the PE Buy Zone. In Q3FY24, its net profit grew by 34.7% YoY to Rs 428.6 crore. Analysts Abhijit Tibrewal, Nitin Aggarwal, and Gautam Rawtani see profitability in the gold and microfinance businesses as the major driver of the firm's net interest income growth. NII grew 33% YoY to Rs 1,450 crore. They say, “Despite a 20bps increase in the cost of borrowings in Q3, the consolidated Net interest margin (NIM) expanded by 35bps to 15.3% due to healthy expansion in yields across product segments.”

The analysts are positive about the company's future, highlighting its active diversification into non-gold segments to reduce its cyclical dependency on gold loans. In Q3FY24, non-gold products accounted for 49% of the AUM mix, a 7% point YoY increase. They forecast a 9% CAGR in gold loan AUM over FY24-26 and expect net profit to grow at a 27% CAGR over the same period, leading to a consolidated RoE of 20% by FY26.

4. InterGlobe Aviation (Indigo):

Geojit BNP Paribas maintains a ‘Buy’ rating on this airline company with a target price of Rs 3,624, indicating an upside of 18.3%. The stock is currently trading in the PE Buy Zone. Analyst Anil R says, “Healthy demand from leisure and corporate travel continues to aid revenue growth. Average aircraft utilization was healthy at 85.8%.” 

In Q3FY24, Indigo’s net profit jumped 110.8% YoY to Rs 2,998.1 crore, while revenue increased by 30.3% YoY to Rs 19,452.2 crore. The analyst believes that Indigo was able to beat revenue estimates due to a 23.7% YoY surge in the number of passengers and a strong pricing environment. 

Anil expects the phased removal of Pratt & Whitney engines in 2024 to impact operations. However, he is upbeat about the management’s risk mitigation plans through secondary market leasing. With a market share of 63.4%, he foresees the earnings momentum to continue, led by strong demand and cost efficiencies.

5. State Bank of India:

Bob Capital Markets maintains its ‘Buy’ call on this bank with a target price of Rs 842, indicating an upside of 19.1%. The stock is currently trading in the PE Buy Zone. In Q3FY24, the bank’s net profit fell by 28.5% YoY to Rs 11,064.1 crore, while its net interest income grew by 5% YoY. Analyst Ajit Agrawal attributes the fall in net profit to a one-off pension and ex-gratia provision totalling Rs 7,100 crore. 

The analyst believes that the 14% YoY growth in advances was enabled by robust growth in SME loans, retail book, and express credit. Meanwhile, deposits grew 13% YoY, driven by term deposits. He says, “We pencil in a credit and deposit CAGR of 15% and 13%, respectively, over FY24-FY26.” Agrawal expects the bank’s healthy business growth, stable margins, and asset quality to boost profitability. He forecasts the bank to maintain its NIM at 3% and deliver an RoE of 17% by FY26.

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

(You can find all analyst picks here)