Buy Stock For 26% Return, Revenue Up of 34% YoY, Board Ready For 150-200bps Margin: Prabhudas Lilladher

Stock To Buy: Target Price & Financial Result

The Current Market Price (CMP) of HealthCare Global Enterprises is Rs. 285. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 358. This stock has the potential to give a 26.05% return, in the upcoming 1 year. This is a small-cap stock with a market capitalization of around Rs. 3,941 crore.

Existing centers grew by 23% YoY while new centers continue to see a strong ramp-up with revenue growth of 34% YoY. Higher occupancy and healthy ARPOB have aided the company's profitability in Q1FY23. HealthCare Global Enterprises (HCG)'s consolidated post IND as EBITDA grew strongly by 41% YoY, and gained by 14% QoQ, to Rs. 722mn, above the brokerage firm's estimates (at Rs. 606mn). Existing centers reported healthy profitability with EBIDTA growth of 24% YoY, and grew by 23% QoQ, to Rs. 750mn, while new centers continue to report the highest EBITDA at Rs. 100mn, which was reported to be at Rs. 154mn in FY22.

Prabhudas Lilladher: Advantages Of The Stock

The company's Capex for Q1FY23 was at Rs. 163mn; the total planned Capex for Ahmedabad is at Rs. 850mn and is expected to commercialize in Q1FY25. Bangalore planned Capex is at Rs. 250mn and expected to be operationalized by Q4FY24. Its management has guided to focus on capacity utilization in Maharashtra and Kolkata. New centers such as Kolkata to are expected turn into positive EBITDA in the next 12 months.

According to Prabhudas Lilladher, "HCG's asset-light approach with a focus on partnering has made its business model - capital efficient and scalable. The company operates most of its Comprehensive Cancer Centre (CCC) on a lease/rental basis with HCG investing only in equipment. Out of 25 HCG's CCC, only four are on owned land. HCG is in a consolidation mode and given the reducing Capex intensity, we expect profitability to improve further from FY23. Our FY23E and FY24E EBITDA stands increase by ~4%. We expect a 28% EBITDA CAGR over FY22-24E after adjusting for IND AS. At CMP, the stock trades at 14x FY24E EV/EBITDA adjusted for rentals. We maintain 'Buy' rating with revised TP of Rs. 358 (Rs. 347 earlier) valuing at 18x FY24E EV/EBITDA."

Company portfolio: HCG

HealthCare Global Enterprises Ltd. (HCG) is a healthcare organization, headquartered in Bangalore. HCG is a combined pool of 450 plus specialists across various domains. HCG mainly focuses on cancer care, tertiary care, infertility treatment, and advanced screening and diagnostics. Under HCG, there are 4 different entities, namely HCG - the Specialist in Cancer Care, HCG Hospitals, Milann - the Fertility Centre, and Triesta Sciences - the Centre for Oncology Diagnostics. These entities are carefully arrayed throughout India to facilitate the highest quality clinical care for patients from all walks of life. In India, HCG's operations are spread across close to 20 cities through its expansion into Tier II and III cities, towns, and villages. Apart from its centers in India, HCG has set up a comprehensive cancer center in Nairobi, Kenya, the company informs.

Disclaimer

The above stock was picked from the brokerage report of Prabhudas Lilladher. 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.