Sharekhan Places A 25% Upside Target On The Stock Of Metropolis Healthcare

Broking firm Sharekhan has suggested buying the stock of Metropolis Healthcare for long-term returns.

Expansion plans to fuel growth

Metropolis Healthcare Limited is one of leading and renowned Indian diagnostics companies. The Company owns a chain of diagnostic centres across India, South Asia, Africa and the Middle East. Over the years, Metropolis has carved a niche for itself.

"Over FY2017 to FY2021, Metropolis added around 1,670 patient service centres and 30 new laboratories, which enabled it to either tap a new geography or fortify its presence in existing regions. Going ahead, to fuel growth, Metropolis is in the midst of expansion plans, wherein the company plans to add around 1,800 patient service centres and 90 new labs over the next three years. Network expansion is largely driven by an asset-light franchise model and complemented by omnichannel presence, which augurs well for Metropolis from a growth perspective," the brokerage has said.

Aims for a higher penetration in the B2C segment in focus cities

According to Sharekhan, Metropolis is targeting to increase the share of the lucrative B2C segment in the overall mix, especially in focus cities. Growth in B2C sales can be attributed to brand-building initiatives, building doctor/physician relations, increasing penetration in focus cities, and upselling opportunities.

"Overall, the B2C segment constitutes 59% of focus cities sales; and management is aiming to take this up to 65% going ahead, which bodes well for Metropolis as the B2C segment yields better margins as compared to the B2B segment," the brokerage has said.

FY2023 is expected to be a year of normalization

Over the long term, management's thrust to grow the lucrative B2C segment, expand network, and leverage digital platform would be key growth drivers for Metropolis. At the CMP, the stock trades at 43x/37.5x/31.6x its FY2022E/FY2023E/FY2024E EPS.

"Over the past three months, the stock price has corrected sharply by ~43% due to these near-term concerns; however, as long-term growth levers are intact, we retain our Positive view on the stock with an upside potential of 25%," the brokerage has said.

The shares of Metropolis Healthcare were last seen trading at Rs 1972 on the NSE.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. 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.