Stock To Buy: Healthcare Diagnostics Company That Can Generate 40% Returns

Markets have turned volatile once again thanks to surging crude prices due to tensions around the Russia Ukraine border. Rising bond yields in the US has also pushed emerging market stocks like India lower. Here is a stock that Sharekhan is recommending investors to buy for good returns.

Buy the stock for a 40% upside from current market price

The brokerage is recommending the stock Of Metropolis Healthcare for gains of nearly 40% from the current market price. At the time of recommending the stock it had said 35% gains, but, the stock has fallen another 5% since recommendation, which is why we are saying 40% gains.

According to the brokerage Metropolis, has charted out a strong growth path ahead which includes growing the share of lucrative B2C segment across the focus cities, expanding network through new labs and collection centers and leveraging the digital platform to strengthen the brand position.

"Also, the thrust to grow the home collection services and likely favorable mix due to higher share of specialized test would be the key long term positives. At current market price , the stock trades at 53.3x/45.9x/36.4x its FY22E/FY23E/FY24E EPS. Further, given the leading position in diagnostics space, wide test portfolio, a pan-India presence and expected synergies from the recent acquisition would be key positives. We retain our Positive view on the stock and expect an upside of 35%," says the brokerage.

Financial performance

According to Sharekhan Metropolis Healthcare reported weak operating performance for Q3FY22 and results are below estimates. "Absence of Government contract business leading to a change in the test mix and increased employee costs due to strengthening of the leadership team, impacted the operating margins for the quarter. The revenues at Rs 293 cr grew 6.7% y-o-y while PAT at Rs 41 cr declined by 29.7% y-o-y. The management's relentless focus on the business-to-consumer (B2C) segment, backed by its wide portfolio of tests, expanding laboratory and patient service center network.

Expansion plans at Metropolis

According to Sharekhan, the management commentary suggests that Metropolis is well on track to execute it expansion plans of adding 90 new labs and 1800 new service centers across regions over the next three years. For FY23 it plans to add 30 labs and 600 collection centers.

"Metropolis is also likely to focus on timely integration of Hitech, network expansion, investments in digital marketing and efforts to grow home collection services, which in turn would drive the growth," it has said.

While we carry brokerage reports, we wish to inform our readers that markets are exceedingly volatile in the current times. Investors must therefore be careful before investing. With crude oil prices surging and bond yield also surging, it is highly possible that stocks could drift lower. We suggest that you invest only if you have an appetite for risk.

Disclaimer

The above stock is based on the report of Sharekhan. Investing in stocks is risky and investors should do their own research. The author, the brokerage firms or Greynium Information Technologies are not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as are at record peaks.