Recommendation from Miscellaneous Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

SAGILITY INDIA : HEALTHY, WEALTHY AND WISE

HERE IS WHY
✓ A major player in the American healthcare sector
✓ Expertise in providing technology-enabled solutions
✓ Proprietary platforms provide a competitive advantage

The U.S. healthcare market, characterised by a complex interplay between payers and providers, is poised for significant growth. The key drivers include an ageing population, the escalating prevalence of chronic diseases, a pronounced shift towards value-based care models, and increasing consumerism. This evolving landscape necessitates a focus on operational efficiency and a seamless member experience for payers. To achieve this, outsourcing is gaining traction across the value chain, driven by factors such as staffing shortages, regulatory changes, and the need for enhanced data security.

This dynamic ecosystem is crucial in enabling payers to navigate the complexities of the market, optimise administrative spending, and ultimately improve the quality and affordability of healthcare for the American population. Owing to this, our low-price scrip recommendation for this issue is Sagility India Ltd (SIL). The company is a technology-enabled business solutions provider in the U.S. healthcare industry, serving clients that include payers (health insurance companies) and providers (hospitals, physicians, and diagnostic and medical devices companies).

SIL offers services to payers that include administrative functions, clinical functions, and revenue cycle management functions. Providers receive services such as financial clearance, medical coding, billing, and accounts receivable follow-up services. SIL is a leading provider of healthcare solutions in the U.S., with a significant market share in the outsourcing sector.

The company’s growth is driven by factors such as an ageing population, chronic diseases, and a shift towards value-based care. The company’s leadership position in the large and resilient U.S. payer and provider solutions market allows it to navigate complex industry challenges, improve operational efficiency and optimise healthcare costs. SIL’s scalable, technology-enabled services and proprietary platforms provide a competitive advantage, enhancing efficiency and service delivery. The company’s deep, long-term and expanding client relationships demonstrate its value proposition and customer satisfaction.

Its scalable and flexible delivery model, with certified data protection and service standards, ensures efficient service delivery across geographies. SIL’s continuous initiatives, including a focus on business excellence and operational efficiency, drive continuous improvement and enhance service delivery. In Q2FY25, on a consolidated basis, the revenue of SIL increased by 21.11 per cent to ₹1,325.05 crore as compared to ₹1.094.10 crore in the same quarter the previous year. The PBIDT excluding other income increased by 28.65 per cent to ₹301.14 crore as compared to ₹234.08 crore from the previous year’s same quarter.

The net profit stood at ₹117.34 crore compared to ₹34.96 crore, a YoY increase of 235.64 per cent. At TTM, the share of SIL is trading at a PE of 95.6 times, which is higher than its three-year median PE of 69.1 times and also higher than the industry PE of 32.5 times. It may look richly valued, however its unique business model and improving financials justify it. The company has a TTM compounded sales and profit growth of 13 per cent and 54 per cent, respectively. It has a debt-to-equity ratio of 0.19 times. We believe a higher valuation is justified and therefore our recommendation is BUY.