2 newly listed stocks to buy as brokerage initiates coverage with bullish stance
1 min read 09 Jan 2023, 12:18 PM ISTGlobal Health (Medanta) and Fusion MicroFinance shares made market debuts in November last year
PremiumDomestic brokerage and research firm JM Financial has initiated coverage on two newly listed stocks Global Health (Medanta) and Fusion MicroFinance, with Buy ratings. Shares of both Medanta and Fusion MicroFinance made their market debuts in November 2022 and have rallied 11% and 17% respectively since listings.
Analysts at JM Financial believe that Medanta's growth momentum, on a high FY22 base, will sustain given the ongoing aggressive expansion (bed addition) of 46% over FY22-25, strong industry tailwinds and management expertise.
"This will drive Revenue/EBITDA/PAT CAGR of 19%/19%/26% over FY22-25 with EBITDA margins at ~21%. Medanta’s healthy cash generation will support future growth as we expect the balance sheet to be net cash by FY24. We believe there could be more upside to our thesis, not factored into our estimates, from: (1) price increases; (2) reversion of international patient footfalls to FY19 levels; and (3) inorganic expansion," the note stated.
The brokerage has initiated with BUY recommendation on Medanta with a March 2024 price target of ₹550. Though, key risks to its thesis include delays in execution, demand slowdown, regulatory risks and concentrated operations in North India.
“Since inception, Fusion has prioritised organic geographic expansion with a focus on strategic management of state concentration risk by expanding into underpenetrated rural areas. This has enabled Fusion to deliver a 51% CAGR in AUM over FY17-1HFY23 and 39% CAGR in total borrowers over the same period," the brokerage said.
In JM Financial's view, Fusion is set to benefit from cyclical tailwinds in the sector as it exits turbulence caused by Covid-19 over the past couple of years and NBFC-MFI as a class see expansion of market share vs. banks. Fusion’s stable management, focus on technology with respect to driving efficiencies and ability to grow borrower base faster than peers should hold the company in good stead as the sector enters a sweet spot w.r.t. growth and asset quality.
“Fusion’s performance in relation to outstanding restructured assets, write-offs have been relatively better than peers and we expect the same to sustain given its stringent underwriting practices. Fusion trades at attractive valuation. We initiate coverage with a BUY rating and a target price of ₹550," recommended the brokerage.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
