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This Multibagger Stock Trading 8.8% Down From 52 Week High, Gets Buy Call For 22% Gains

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Prabhudas Lilladher in its recent report published on 19 December 2022 maintains its "Buy" rating on Narayana Hrudayalaya Limited with a target price of Rs 920/share. The brokerage with the given target price, claims a potential upside of up to 22% in its share price. Narayana Hrudayalaya is a mid cap Hospital & allied sector company having a market capitalisation of Rs 15,325.02 crore. Below are the details of the report:

 

Stock Outlook & Returns over the past 5 years

Stock Outlook & Returns over the past 5 years

The stock today opened at Rs 753.65/share, currently trading at Rs 758.65/share, 1.17% up from its previous close on NSE. It is trading 8.8% down from its 52 week high. It recorded its 52 week high last month on 10 November 2022 at Rs 820/share, while its 52 week low was recorded on 20 December 2021 at Rs 544.95/share.

In the past one week, the share price of the Narayana Hrudayalaya moved down by 1.56%, whereas, in the past 1 month, it moved down by 1.05%. However, in the last 3 months, it has given 7.24% positive returns. In the last 1 year, it gave 31.95% positive returns. In the last 3 years, it has given 148.12% multibagger returns. In the past 5 years, it has given 161.64% multibagger return.

 

Health city expansion
 

Health city expansion

Currently, NARH has around +1,370 operational beds including recently acquired 100 beds of Orthopedic and Trauma hospital in Health City (Bangalore). The company has additional land available in Health City and also intends to refurbish Trauma as well as MSH unit which will help them to enhance capacity. Recently company converted certain beds from general ward into ICU in its NH Cardiac unit, which helps them to perform more surgeries and improve case mix. Further company continues with its engaging to improve ALOS, upgrading machines and more emphasis on digital. Overall we expect +10% EBITDA growth across its flagship units in health city in medium term.

Cayman profitability to sustain

Cayman profitability to sustain

Operationally, Cayman's business has been strong from last 2 years. Post opening up of tourism, volumes continue to remain healthy. Management remains confident of sustainability of current profitability. "We expect current quarterly run-rate of $10-12mn EBIDTA to sustain. Commencement of Cayman's new unit got delayed on account of COVID and shortage of labor. However, it is expected to operationalize from FY25, while radiotherapy/ Onco block will operationalize from H1CY23 (as guided earlier). New unit will offer services such as day care services, dialysis, critical care, pediatric services and some elements of Ortho. Further company will continue to explore opportunities in neighboring Cayman Islands like Bahamas and Bermuda," the broekrage said.

Focus capex across core and high performing regions

Focus capex across core and high performing regions

Management guided capex of Rs.10bn annually in FY23E and FY24E. Bulk of capex will be spent on high performing assets such as Bangalore, Kolkata and Cayman. Most of the capex will be deployed towards brownfield expansion in Health City, recent acquisition of Trauma unit in Health city Bangalore, greenfield expansion in Kolkata and Cayman new unit. Of Rs 20bn likely capex spread across FY22-24E, $100mn (Rs7-8bn) will be towards Cayman unit. Currently, NARH has net debt of Rs. 2.7bn and is generating strong FCF across business. In interim, given high intensity of capex, net debt is likely to go up.

Other Highlights

Other Highlights

1) Improving trend in ARPOB, ICU days, IP/ OP realizations aided profitability over last few quarters.

(2) Among existing mature units (other than flagship) in India, company has no plans for divesting.

(3) New Hospitals: Both Dharamshila and Gurgaon units are scaling up well. Mumbai unit breakeven will take time.

(4) In Kolkata, company is scouting for new land and will continue to explore any value accretive inorganic opportunities.

(5) Generally, price hike takes place in month of January across units in India.

(6) Combination of high end tertiary and clinical work driving higher ARPOB and margins with lower ALOS. This would be achieved through implementation of digital initiatives, upgrading machines in Bangalore, Howrah and Jaipur units.

Strong footing in Health City, Buy for a target price of Rs 920/share

Strong footing in Health City, Buy for a target price of Rs 920/share

Prabhudas Lilladher said, "We are increasing our FY24/25E EPS estimates by 3.7% and 5.8% as we factor in higher profitability from units in Health City, Bangalore. Narayana Hrudayalaya's (NARH) profitability across India and Cayman was strong in H1FY23 (up 44% YoY) and we expect this growth momentum to sustain. The company plans to continue with its aggressive capex plan for next 2-3 years (guided capex of Rs.10bn annually in FY23E and FY24E.). More importantly capex spend would be towards its core and high performing regions such as Bangalore, Kolkata and Cayman. This enhances growth visibility "

It added, "We expect EBITDA CAGR of 22% over FY22-25E.. Despite capex intensity going up, RoE/ RoCE will remain healthy at ~25%. Maintain 'BUY' rating with a revised TP of Rs. 920/share (earlier Rs900/share), based on 20x Sept 2024E EV/EBITDA for India business and 15x EV/EBITDA for Cayman hospitals. At CMP, stock is trading at attractive valuations of 16x EV/EBITDA (adj for IND AS) and 25x P/E on FY24E. Faster ramp up in new Cayman unit will be key."

Disclaimer

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 consult with certified experts before making any investment decision.

Story first published: Wednesday, December 21, 2022, 10:23 [IST]
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