Narayana Hrudayalaya and Devyani International: Weekly Recommendations

The two stocks recommended by SMC Global Securities’ Research Team this week are Narayana Hrudayalaya and Devyani International. These two stocks have shown great potential with positive financial estimates for the next two financial years. So, let’s go through the details of the two stock recommendations for the period between January 6, 2025 and January 10, 2025.

Narayana Hrudayalaya Limited

Narayana Hrudayalaya share price is ₹1,310 (as on January 3, 2025) and its target price is set at ₹1,537 with an upside potential of 17%.

Narayana Hrudayalaya Limited: Investment Rationale

• • Narayana Hrudayalaya is one of the leading healthcare service providers in India, operating a chain of multispecialty, tertiary, and primary healthcare facilities.
  • The company has a network of 18 hospitals and 3 heart centers across India along with an overseas presence in the Cayman Islands, with over 5,790 operational beds and a capacity of over 6,250 beds.
  • It has incurred ₹536 crores capex in H1 FY25, with ₹320 crores invested in India, including ₹160 crores for land purchase in Bengaluru and the rest for regular capex and brownfield expansion in Kolkata.

• Plans include adding 700 Greenfield beds in Kolkata and Bengaluru, and 150 brownfield beds in Raipur over 3–4 years. The management of the company has guided ₹500 crores capex for Bengaluru’s greenfield expansion. Kolkata’s 350-bed Rajarhat facility (part of a 1,000-bed plan) expects approvals within 3 – 4 weeks.
• On the development front, its new multi-specialty hospital in the Cayman Islands, commercialized in Q2FY25, is expected to remain margin dilutive for 4–5 more quarters. Moreover, the hospital has commenced outpatient (OP) services, while inpatient (IP) operations are pending government approvals and are expected to start in 4 weeks.
• During Q2 FY25, consolidated total operating revenue was ₹1,400 crores as compared to ₹1,305.20 crores in the corresponding period of the previous year, reflecting a growth of +7.3 % YoY and +4.4% QoQ.

• In Q2 FY25, consolidated EBITDA stood at ₹332 crores, reflecting a margin of 23.7% as against ₹326.50 crores in Q2 FY24, translating into a growth of +1.7% YoY and +1.4% QoQ.
• In Q2 FY25, consolidated PAT stood at ₹198.80 crores, reflecting a margin of 14.2% as compared to ₹226.70 crores in Q2 FY24, translating into a change of – 12.3% YoY and -1.3% QoQ.
• As on September 30th, 2024, the total Borrowings less Cash & Bank Balance and Current Investments was ₹2,684 million, representing a net debt to equity ratio of 0.08 (Out of which, debt worth US$ 81.5 million is foreign currency denominated).

Narayana Hrudayalaya Limited: Shareholding Pattern

The promoter’s shareholding is highest in Narayana Hrudayalaya at 63.85%.

Narayana Hrudayalaya Limited: Valuation

The company has delivered strong Q2 performance and reported the highest-ever revenue on a quarterly basis with sustainable profitability margins, which is on account of improvement in realizations and increased domestic patient footfalls.

Despite the slowdown in international patient inflows due to geopolitical tensions in the neighborhood, it has been able to show overall growth in revenues during the quarter through its enhanced focus on domestic business.

The performance improvement is seen across its flagship units, and other hospitals, and steady improvements in the performance of its newer hospitals. Thus, it is expected that the stock may see a price target of ₹1,537 in 8 to 10 months’ time frame on expected P/BV of 7.45x and FY26 BVPS of ₹206.27.

Narayana Hrudayalaya Limited: Risk

• Strict operational and strategic regulation
• Regulatory and Compliance Risks

Devyani International Limited

Devyani International share price is ₹191.30 (as on January 3, 2025) and its target price is set at ₹226 with an upside potential of 18%.

Devyani International Limited: Investment Rationale

• • Devyani International Limited is the largest franchisee for Yum Brands (KFC & Pizza Hut) in India. It is the sole franchisee for Costa Coffee Brand and stores in India.
  • It caters to South Indian vegetarian food lovers with Vaango, launched over a decade ago, and is a prominent Brand in the Food Retail Business (FRB) category with its Food Courts. As of September 30, 2024, it operates more than 1,900 stores across brands in over 260 cities in India, Thailand, Nigeria, and Nepal.

• The company has expanded its brand portfolio with the addition of three new lifestyle QSR brands, TeaLive, New York Fries, and SANOOK KITCHEN. ‘Tealive’ is a renowned Malaysian tea and beverage brand, ‘New York Fries (NYF)’, is a Canadian quick service snacking brand celebrated for its French fries, hot dogs, and poutine, and ‘SANOOK KITCHEN’ is a popular Singapore-based brand specializing in Thai and Asian cuisine.
• With its exclusive rights for these brands in India, DIL is consolidating its strategy of “FOOD ON THE GO” and “HOUSE OF BRANDS”. The expansion will further strengthen its market presence and hence would offer its customers a wider variety of food & beverage brands.

• The company continues to add new stores and targets to expand its store count to 2,000 by FY2025. In the first half of the year, it added 122 net new stores. It added 68 net new stores in Q2 FY2025, thereby further strengthening its brand presence. It is investing in new stores across its brands and expanding its reach to connect with its target consumers. It has 999 stores for KFC, 599 stores for Pizza Hut, and 207 stores for Costa Coffee.
• According to the management, its core brands have continued to innovate, both by refreshing existing menu items and reintroducing popular favorites as LTOs. To meet the evolving customer preferences, Costa introduced seasonal and regional menu adaptations, also featuring international flavors that resonate with consumer trends.
• Its refreshed menu, which includes Quiche, Calzone, and tarts, has been well received. It launched new variations of rolls in KFC, featuring a range of national and international flavors. Relaunched Momo Mia Pizza in a new and improved version in Pizza Hut.
• Its Vaango brand is on a growth trajectory, with 90 stores as of September 30, 2024. It has introduced Vaango’s new line-up of traditional snacks, including Banana Chips, Murukku, and Madras Mixture, alongside its Filter Coffee decoction, all designed to engage and resonate with its target audience.

Devyani International Limited: Shareholding Pattern

In the overall shareholding of Devyani International, promoters have the highest shareholding of 62.72%.

Devyani International Limited: Valuation

The company`s addition of new brands reflects its commitment to bringing diverse, high-quality contemporary food & beverage brands to our customers while driving sustainable growth.

Besides, new store additions and product innovations for targeted customers would drive future growth. Thus, it is expected that the stock may see a price target of ₹226 in 8 to 10 months’ time frame on current P/BV of 19.80x and FY26 BVPS of ₹11.43.

Devyani International Limited: Risk

• High input cost
• Economic slowdown

Conclusion

These two stocks, one from the healthcare sector and the other from the food and beverage sector can reach their target price in the coming 8 to 10 months. But it is always better if you do your analysis before investing and set a stop loss target. To keep track of your invested stocks, open demat account with SMC Global Securities and invest on the go.

Reference:
https://www.smctradeonline.com/research/wise-money/241

Author: All Content is verified by SMC Global Securities.