Buy This Healthcare Stock Which Can Become A Potential Multibagger

Healthcare stocks have seen some selling pressure over the last few quarters, with some companies facing margin pressures, while for Diagnostics players, the conclusion of covid worries has left some impact. However, select diagnostic players can offer tremendous growth opportunities including those like KRSNAA Diagnostics, which relies on a public private partnership.

Stock price has halved from IPO levels

The stock of Krsnaa Diagnostics looks appealing given the sharp fall in the share price over the last few months. The shares of the company, which had an IPO price of Rs 965 are now available at a price of Rs 465. The company is a good diagnostics play, with a rapid expansion plan. It has a good public private partnership plan and has tie-ups with various state governments.

4 tender won from various states

The company also recently won a Maharashtra mega tender wherein Krsnaa needs to deploy 31 CT scan and operate 8 government installed CT scan across 39 government hospitals. As of today, Krsnaa needs to deploy 41 CT scan, 2 MRI, set up 24 labs and 190 collection centres under various contracts excluding the ones mentioned in the Red Herring Prospectus.

Apart from the tender won in Maharashtra, the company also won tenders from the States of Rajasthan, Tripura and Delhi.

Good expansion plans

The company is expanding its presence and during the quarter they added 6 radiology centers, 58 tele-reporting centers, 3 pathology labs, and 27 collection centers. As of today, Krsnaa is a leading PPP diagnostic player with 113 radiology centers, 1,439 tele-reporting centers, 53 processing labs, and 613 pathologic collection centers.

Good financial performance

Despite a drop in Covid revenues, the Q1 FY2023 revenues and profitability of , Krsnaa's core business of radiology and pathology, registered Revenues of Rs. 113 crores, a growth of 10.5% on a year-on-year basis, and 6% on a sequential basis. This was practically a non-COVID quarter and the COVID revenue declined to a mere 0.3 crores compared to 30 crores in the comparative quarter in the previous year. Our EBITDA for the quarter stood at Rs. 28 crores with margins of 25% and net profit of Rs. 14 crores with margins of 12.6%.

Attractive on valuations

The shares of the company having fallen, has made the stock attractive. The price to earnings ratio for KRSNAA Diagnostics is now 22 times, which is reasonable for a fast growing company. For FY 2023-24, with the contracts seeing fructification, there is a potential for good earnings growth. Buy the stock for long-term returns.

Regarding income tax raids on the company

One of the key hangover and risk for the stock is the income tax raids. The Income Tax Department in the last month conducted a search under the powers conferred to them under Section 132 of the Income Tax Act 1961 at the premises of the holding company, as well as various other locations.

"The holding company has provided and will continue to provide all possible assistance to the officials and has furnished all the required explanations, information and clarifications as currently required or requested by the department. "The income tax authorities have not yet concluded the assessment and there is no income tax claim or demand made by the tax authorities yet in relation to the search. Krsnaa continues to operate in the normal course of business and there are no interruptions. In last week, it came to our notice, there were certain media articles making false and baseless allegations of Krsnaa accepting the undisclosed income. None of these allegations mentioned in the media articles are borne out of any regulatory documents served on us. The remark about undisclosed income is not only inaccurate, but also baseless," the company management clarified.

Disclaimer

Investing in stocks is risky. Investors need to do their own research before investing. Neither the author, nor Greynium Information would be held responsible for losses based on a decision in this article. The author owns stock in Krsnaa Diagnostics.