2 Stocks To Buy Suggested By Edelweiss Broking Ltd For 36% Returns

The Edelweiss Broking Ltd has suggested buying the stocks of CreditAccess Grameen Ltd and Krishna Institute of Medical Sciences Ltd for good upside potential. For the stock of CreditAccess Grameen Ltd, the brokerage has set a target price of Rs 816 against the current market price of Rs 597 resulting in a gain of 36.6%. Whereas for the stock of Krishna Institute of Medical Sciences Ltd, the brokerage has set a target price of Rs 1,651 against the current market price of Rs 1,218 resulting in a gain of 36%. According to Edelweiss CreditAccess Grameens (CAG) reported numbers largely in-line with our estimates on the net revenues front. Higher OPEX due to branch expansion was offset by lower than expected provisions resulting in a PAT beat of 10% against our estimates. Disbursements came in above pre-covid quarterly run rate but remain below Q3/Q4FY21 levels. Oct21 disbursements came in higher than July-Sept21 monthly run-rate indicating strong growth momentum in H2Y22. Gross Loan Portfolio (GLP) grew by 19% YoY / 5% QoQ to INR 13,333cr driven by robust disbursements. Management has guided for a 17-19% growth in GLP for FY22 sans a covid third wave. Edelweiss has said in its research report that the companys Consolidated GS-3 remained largely steady with marginal increase of 11bps sequentially to 7.7% largely driven by MMFL Stage -3 recognition being moved to 60dpd+ from 90dpd+ in the quarter. CAG carries an overall ECL provision of INR 740cr (5.9% of loan book). Consol. restructured assets stood at ~1.3% of GLP well ahead of other MFI focused banks and NBFCMFIs which have reported results till date. Management expects credit costs to remain between 4.7-4.9% for FY22 as the company would write-off sticky stage -3 assets in H2FY22.Advertisement The brokerage has said that CAG has reported both growth and asset quality better than its peers and has emerged out of the pandemic in a much better position compared to peers. Incremental provisioning in H2FY22 is likely to provide a clean slate to the company to pursue growth and pre-Covid return ratios in FY23. We believe CAG is best placed to capture the structural MFI growth story with a covid third wave being the significant risk to our hypothesis. We maintain BUY with the same target price of INR816. According to Edelweiss KIMS reported a decent set of numbers with Revenue (INR 412cr up 1% YoY) miss our estimates by ~3%, however, EBITDA/PAT reported ahead of our estimates by 2%/10% to INR129cr/INR84cr. KIMS saw normalization of business as COVID-related cases came down and elective surgeries picked up. Increased Patient flow, new doctor additions in existing specialties, consistent growth in Heart and Lung transplant programme & increasing normalization of business to pre-COVID levels resulted in flat revenue. The companys Gross profit grew 4% YoY & down 10% QoQ to INR 326cr in Q2FY22 with gross margin expanded by 280bps YoY to 79.2%. EBITDA margin came in at a record level of 31.3% (v/s est. of 29.7%), mainly on account of tighter control on medical consumption cost, high occupancy and robust IP/OP volume. The acquired asset reported significant improvement in EBITDA margin to 20.7% in H1FY22 (vs 16.8% in FY21) says Edelweiss. Edelweiss has claimed in its research report that KIMS reported good improvement in non-COVID business in Q2FY22. We maintain our positive view on KIMS, on account of robust growth in non-COVID volume & improvement in occupancy, maintained higher margins with a sustained focus on operational efficiency and strong expansion plans. The net cash at the end of the quarter stood at INR 395cr (gross debt of INR 50cr). KIMS expected to pay INR 230cr (first tranche of acquisition cost) for Sunshine Hospitals acquisition in the near term, even after that company has net cash. KIMSs strong expansion plan for the addition of ~2,300 beds over 36-48 months will be funded through a mix of internal accrual and borrowing, with maintaining D/E at a restricted level. Maintain BUY with a target price of INR1,651/share. The above stocks are picked from the brokerage report of Edelweiss Broking Ltd. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.