It is always a risky bet to buy into stocks when the markets are at a peak. The Sensex is near the 38,000 levels and hence it would be a good idea, to look at stocks that are a little defensive. One such stocks is the hospital stock, Shalby Ltd.
Shalby is one of the leading healthcare provide in the knee replacement category. It has 11 hospitals with a bed capacity of 2012 beds. It has been one of the faster growing listed hospital chains in the country, with double digit return ratios.
Shalby had come in with an IPO, which was priced at Rs 248 and today you are getting the shares at Rs 148. The promoters have a near 79 per cent holding in the company.
Solid financial performance
The company had a solid performance for the quarter ending March 31, 2018. Net profits surged to Rs 18.02 crores, as against Rs 7.87 crores in the previous quarter of 2017.
The total revenue of the company grew by 27.9%. The EBITDA margins did drop, but was largely due to higher advertisement spend for commissioning of new units ,launch expenses for the same.
Presently, as much as 54.2 per cent of the revenues of the company comes from anthroplasty and the rest from cardio, oncology, general medicine etc.
Why the stock of Shalby is a great bet?
1) The company has repaid loans and is now a debt free company.
2) Expansion completion at Jaipur, Surat will add to revenues. Initial launch expenses are slated to also come down.
3) The promoters holding remains a solid 79 per cent and are not pledged.
4) The stock is available at a new 52-week low of Rs 149, as against the IPO price of Rs 248.
5) Hospital stocks receive heavy discounting, and their p/e multiples range from 30 time to 60 times. Shalby is available at a one year forward p/e of just 14 times, making the stock rather cheap.
The shares of Shalby are not very expensive. Also, the Sensex and the Nifty are at peak levels. If there is a sudden fall in stock prices, hospital stocks may not fall too much, given that these are largely defensives.
This is a good stock pick, given that return ratios in the past have been good and the promoter holding continues to remain very high. Buy the stock for short and medium term gains.