Buy This Multibagger Small Cap Hospital Stock, Shares Likely To Surge 19%, Says Prabhudas Lilladher

Narayana Hrudayalaya Limited, a small-cap hospital company, has been assigned a buy call by Prabhudas Lilladher. A target price of Rs 900 per share has been estimated by the brokerage for the stock. The stock is expected to jump up to 19% from its current level, based on the brokerage's target price. Highest ever profitability reported across India and Cayman unit. Capex of Rs10bn annually in FY23 and FY24.

Stock Outlook & Returns

The stock is currently trading at Rs 760.15 per share, 0.41% down from the previous close of 763.40 per share. Today, it opened at Rs 768.60 per share. The 52 week high level is Rs 820 and the 52-week low is Rs 530, respectively. It has a market cap of Rs 15,550.84 core.

In a week, it has given 3.29% positive returns, whereas, in a month it gave 4.46% positive returns. In 3 and 6 months, it has given 11.77% and 12.62% positive returns, respectively. Over a year it gave 35.64% positive returns. It gave multibagger returns in 3 and 5 years, 159.98% and 161.18%, respectively.

EBITDA above estimates; aided by India and Cayman biz

Narayana Hrudayalaya reported pre-IND AS EBITDA of Rs 2.3bn, above our estimates. Adjusted for St Lucia's one-time EBITDA loss of Rs.85mn in Q2, EBITDA came in at Rs.2.4bn, up 33% QoQ and 79% YoY (20% above our estimates of Rs. 2bn). India biz continues to report strong EBITDA of Rs1.5bn; up 16% QoQ and 71% YoY. The sequential growth was aided by seasonality and better occupancy across units. Cayman reported EBITDA of USD 12.7mn vs USD 7.9mn in Q1 and USD 7.8mn in Q2FY22. OPM of 44%, up 900 bps QoQ and 400bps YoY.

Revenue grew by 21% YoY (11% QoQ) to Rs11.4bn. ARPOB for India business was up 1% QoQ to Rs. 33,699 per day. International biz contribution was at 8% of total revenues vs 6% in Q1. Discharges were higher by 20% YoY for India biz. Cayman reported $29.1mn (up 28% QoQ) revenues in Q2FY23. Other income came in higher at Rs 312mn which includes Rs160mn of one-off income. Discharges were lower 8% YoY for Cayman biz, however ARPOB was up 11% YoY and QoQ. Reported PAT was at Rs1.7bn (up 70% YoY) vs our estimate of Rs 1.3bn. Net debt increased by Rs.1.9bn to Rs2.7bn, due to the recent acquisition of Ortho and trauma unit.

Strong beat aided by India and Cayman unit, buy for Rs 900 target price

According to Prabhudas Lilladher, Narayana Hrudayalaya reported highest ever profitability in Q2 from its both Cayman (EBITDA of $ 12.7mn; up 65% YoY) & India biz (EBITDA of Rs. 1.5bn; up 71% YoY). We expect this growth momentum to sustain. The company plans to continue with its aggressive capex plan for next 2-3 years, which will aid in enhancing growth visibility beyond FY24. However, it may increase debt and impact return ratios in near term too.

"We expect EBITDA CAGR of 20% over FY22-25E. Our FY23E-25E EBITDA stand increase by 4-8%. Despite capex intensity going up, RoE/ RoCE will remain healthy at ~25%. We maintain 'Buy' rating with revised TP of Rs. 900/share (earlier Rs810/share), based on 20x Sept 2024E EV/EBITDA for India business and 16x EV/EBITDA for Cayman hospitals. At CMP, stock is trading at attractive valuations of 15.5x EV/EBITDA (adj for IND AS) and 25x P/E on FY24E," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of Prabhudas Lilladher. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.