Buy This Midcap Medical Sciences Stock With Rs. 1565 Target Price: ICICI Direct

Stock To Buy: Target Price

The Current Market Price (CMP) of Krishna Institute of Medical Sciences is Rs. 1,352. ICICI Direct has estimated a Target Price for the stock at Rs. 1,565. This stock has the potential to give a 15.72% return, in the upcoming 1 year. It is a mid-cap stock with a market capitalization of around Rs. 10,884 crore. In the last 1 month this stock has surged by 12.44% on NSE.

Financials

The company's revenue in FY22 was recorded to be at Rs. 16,508 bn, which is expected to be at Rs. 23,595 bn in FY23. Their net income in FY22 stood at Rs. 3,327 crore, bn is expected to be at Rs. 3,505 bn in FY23. The company's EPS in FY22 was recorded at Rs. 41.6 bn, which is expected to be at Rs. 43.8 bn in FY23.

Expansion plans

KIMS has identified Maharashtra, Bangalore, Chennai, and central India as key regions to drive the next phase of its growth. It intends to enter these geographies through a series of partnerships with reputed doctors, to further scale the operations. KIMS has acquired majority stakes in Manavata Hospitals, Nashik, and Kingsway Hospital, Nagpur. The company also intends to set up a 350-bed hospital in Bangalore and a 300-bed facility in central India, over the next 2-3 years to further expand its operations.

Stock Advantages: ICICI Direct

"We are positive on the company's long-term outlook considering strong brand recall in its home markets of Andhra Pradesh and Telangana; expansion in adjacent geographies; strong execution and prudent capital allocation; healthy margins. We initiate coverage on KIMS with a Buy rating and target price of Rs. 1,565/share, based on 17xFY24E EBITDA. However, key downside risks are a slowdown in growth in south India, and delay in capacity addition," stated ICICI Direct.

Growth Potential

Overall, we expect revenue to grow at a CAGR of 26.7% over FY22-FY24E led by the consolidation of Sunshine Hospitals and Kingsway Hospital, Nagpur. We expect the EBITDA margin to decline to around 28% due to the proposed expansions. RoCE is likely to depress from current levels due to high Capex requirement for the expansions and acquisitions, yet remain healthy at ~18%, the brokerage firm mentioned.

Company Portfolio:

Krishna Institute of Medical Sciences (KIMS) is one of the leading multi-disciplinary integrated private healthcare services providers in Andhra Pradesh and Telangana. It operates a chain of multispecialty hospitals with a focus on tertiary and quaternary healthcare. The company has a strong acquisitive history with a proven track record of execution. With recent acquisitions in Nashik and Nagpur and proposed expansion in Bangalore and Maharashtra, KIMS has found a new growth lever in addition to a strong foothold in its home markets.

Sectoral growth

India's overall healthcare market is expected to grow at a CAGR of 15-17% between FY21 and FY25 driven by rising cases of non-communicable diseases, rising government expenditure on healthcare (including Ayushman Bharat Yojana), growing awareness, increasing affordability, and pent-up demand due to the pandemic. Inpatients account for around 70% of the overall market for hospitals in value terms while the remaining is from outpatients.

Disclaimer

The above stock was picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.