2 Small-Cap Stocks To Buy As Suggested By Top Brokerage House

One of the prominent brokerage firms Prabhudas Lilladher has suggested the investors to buy shares of Safari Industries and Max Healthcare Institute. Both the small-cap companies are showing signs of good growth, the stock broking firm feels.

Recently both companies posted their Q4FY23 numbers and they were good. Hence Prabhudas Lilladher has given a 'Buy' rating to the stocks of both companies after factoring in their future growth prospects.

Safari Industries

Safari is in the business of manufacturing and trading luggage and luggage accessories. It is a small-cap company incorporated in 1974 that manufactures hard luggage and soft luggage. The hard luggage is mainly made of polypropylene (PP) and polycarbonate (PC) and manufactured in-house by Safari at its plant located in Halol, Gujarat, while the soft luggage is made of fabrics of various kinds and is mainly imported by Safari.

Safari reported yet another quarter of stupendous performance with a record GM/EBITDA margin of 47.9%/19.3% respectively given the rising benefits of indigenous manufacturing, cooling RM prices, and stabilization in ocean freight, as per Prabhudas Lilladher.

Buy shares At Target Price Of Rs 2,790

Based on the company's plans of expanding the manufacturing capacity by 1.25 lakh pieces per month and a full-fledged entry into the premium segment (soft launch already done on a D2C channel) in the near term is likely to further elevate gross margin profile, the brokerage firm gives it estimates and a Buy rating.

"We expect sales/PAT CAGR of 18%/23% over FY23E-FY25E and maintain BUY with a price target of Rs 2,790 (38x Sep-24EPS; no change in target multiple). We have not accounted for optionality arising from entry into the premium segment which can act as an upside risk to our estimates."

Stock Movement

The latest closing price of the Safari stock ended 0.67% higher at Rs 2,491.45 over the previous day's closing. In the last one year, the price has surged massively by 166.64%, and in the last three years, it has skyrocketed by 632.78%.

Max Healthcare Institute

Max Healthcare Institute was founded in 2001, with headquarters in New Delhi. It is a small-cap company that owns and operates in providing healthcare facilities across Delhi National Capital Region, as well as one hospital each in Mohali, Bathinda, Dehradun and Mumbai.

The healthcare chain operator reported EBIDTA of Rs 4.3 billion (up 6% QoQ) beating the stock-broking firm's estimates at 4%, aided by higher ARPOB of Rs 77.7k in Q4 against Rs66.8k in Q3.

Prabhudas Lilladher points out that the company showed phenomenal growth in the past two years. Also, it expects this momentum would continue given the strong expansion plans (+1500 additional beds by FY25E end), improving payout mix (15% revenue contribution from institutional by FY25E vs 17.5% now), and scale-up in labs.

Besides, operational efficiency has also been commendable, especially in competitive markets like NCR.

Buy Shares At Target Price Of Rs 565

As per the brokerage firm, "Our FY24/25E EBIDTA stands marginally increased by 2% and expect 14% EBIDTA CAGR over FY23-25E. We ascribe 25x EV/EBIDTA (24x earlier) based on FY25E. Maintain a 'BUY' rating with a revised target price of Rs. 565/share (earlier Rs 500/share)."

Stock price movement

The last market price of Max Healthcare Institute stock is Rs 534.40. It rallied by 2.11% on an intraday basis. The share price surged by 47.73 % and 353.07% in the last one year and three years respectively.

Disclaimer

The stocks have been picked up from the brokerage reports of Prabhudas Lilladher. Greynium Information Technologies, the author and the brokerage firms are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.