Why Analysts See This Small Cap Stock Surging Over 130%

Shares of Religare Enterprises are off to a slow start in 2024. On a year-to-date basis, the stock is up around 4%. However, analysts think the stock is poised for exceptional gains going forward.

The Religare Enterprises Analyst: The analyst team at Ventura maintained the “buy” rating for the stock and raised the 24-month price target to ₹532 from ₹471. The target indicates around 135% from the current market price of around 135%.

The Religare Enterprise Thesis: The brokerage pointed out that the company over the past few months has announced several plans for the future of its business. The analysts first noted that Care Health Insurance Ltd (CHIL) has been consistently generating strong cash flows, benefiting from prudent cost management and favourable industry dynamics within the insurance sector.

The removal of fraud status on Religare Finvest Ltd (RFL) and the anticipated exit from the corrective action plan (CAP) imposed by the RBI are expected to pave the way for fresh business opportunities starting from FY25, the brokerage said. As per the analysts, this development is likely to attract growth capital from investors and unlock the underlying value of the platform.

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The brokerage said that the worst phase behind the company and its subsidiary Religare Housing Development Finance Corp is poised to accelerate its business activities. It is expected to leverage a fresh credit line of ₹100 crore from REL in FY25, which could potentially support a loan book of up to ₹500 crore. Subsequently, Religare Housing aims to generate additional capital independently in the future, the analyst pointed out.

Talking about the company’s broking business, the analysts said that Religare Broking is strategizing to reclaim its market share by offering a mix of traditional and discount broking services through its new digital platform. The company also has plans for inorganic growth to expand its client base.

Given these factors, the domestic brokerage firm projects Religare’s revenues to grow at a compound annual growth rate (CAGR) of 28.2% to reach ₹12,635 crore by FY27. Moreover, net earnings are expected to swing from a loss of ₹208 crore in FY23 to a profit of ₹670 crore by FY27.

Price Action: Religare’s share price was down 1.87% to trade at ₹226.20 in early trade on Wednesday.

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