Stock To Buy: This Small Cap Stock Gave 53.08% Returns In 3 Years, Brokerage Sees 16% Upside

Leading brokerage firm Prabhudas Lilladher is positive on Aster DM Healthcare Limited (ASTERDM). The brokerage suggests "buy" for decent gains up to 16% with a target price of Rs 265 per share. ASTERDM is one of the largest integrated private healthcare service providers operating in GCC (Gulf Cooperation Council) countries and an emerging player in India. It is a small-cap multinational hospital company having a market cap of Rs 11,408.88 crore.

Stock's CMP, 52-Week Low/High, & Returns in 5 years

ASTERDM shares last traded at Rs 228.40 per share, gaining 3.98% as compared to its previous close on NSE. The stock recorded its fresh 52 week high on 4 November 2022 at Rs 275.60. Whereas, it recorded its 52 week low on 7 march 2022 at Rs 158.10 per share. 

The stock was listed on 26 February 2018, and since its listing, it surged by 25.81%. However, in the past 1 week, it has fallen by 14.54% and in the past 1 month, it has fallen by 5.56%, respectively. In the past 3 and 6 months, it gave 12.26% and 34.67% positive returns on investments. It gave 53.08% positive return on investments in the past 3 years.

EBITDA miss on GCC biz

Consolidated margins were down 240bps YoY to 11.3%. Other income came in lower QoQ at Rs 184mn. PAT came in lower at Rs 416mn, vs our estimate of Rs 1.3bn. Revenue grew by 13% YoY (6% QoQ) to Rs 28.1bn; largely in line with our est. Adjusted for Covid Testing and vaccination revenues; it was up 22% YoY. GCC hospital biz reported OPM of 13.9%; down 285 bps YoY and 70 bps QoQ while India hospital biz reported OPM of 18.3% (up 10 bps YoY and 465 bps QoQ). 

ARPOB for India business was down 4% QoQ to Rs 34.9K per day. Segment wise, pharmacy reported strong EBITDA growth of 16% YoY while clinics reported 33% YoY EBITDA decline given high Covid base. In GCC, contribution of Covid testing revenue reduced to 6% vs 26% in Q2FY22 (4% in Q1). India and GCC hospitals occupancies were at 72% and 49% in Q2. Net debt increased by Rs.2bn to Rs 20.5bn; of which India debt amounted Rs.3.9bn. 

Strong quarter for India; subdued GCC operations, Buy

According to the brokerage firm, ASTER DM's consolidated EBITDA (post IND AS 116) de-grew 7% YoY (up 9% QoQ) to Rs 3.2bn; 13% below our est. of Rs 3.6bn. GCC hospital EBITDA declined by 10% YoY (flat QoQ) to Rs 1.3bn, while India business EBITDA (post Ind AS) was up 22% YoY (51% QoQ) to Rs. 1.3bn. 

"ASTERDM has a unique business model with presence in India and an established business with strong returns in GCC. We expect 9% EBITDA CAGR over FY22-25E, as margin in its India business will gradually improve with brownfield expansion and new hospitals ramp-up in GCC," the brokerage has said. 

At current market price, the stock trades at an attractive valuation of 10x FY24E EV/EBITDA, which is at 25-50% discount to Indian peers. "We believe such high discount reflects ASTERDM's lower contribution from India region and higher capital outlay outside India. Also, such steep discount is unwarranted given stable profit trajectory and increasing contribution from India. Our FY23E and FY24E EBITDA stand reduced by 6-8%. We maintain our 'Buy' rating with TP of Rs. 265/share (earlier Rs 234/share) based on 18x FY24E EV/EBITDA to India business and 8x EV/EBITDA to GCC business," 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.