Buy Aster DM Healthcare Ltd For Target Rs. 250 - ICICI Direct
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Normalcy in India, GCC; focus on India expansion…
About the stock: Aster operates in segments like hospitals, clinics, retail pharmacies and provides healthcare services to patients across economic segments in several GCC states through various brands such as Aster, Medcare and Access.
Its network consists of 13 hospitals, 109 clinics and 233 retail pharmacies in the GCC states;14 hospitals, nine clinics, 90 pharmacies and 66 labs in India; total bed capacity: GCC: 1160, India: 3920
Revenue break-up 9MFY22: hospitals: 56%, pharmacies: 21%, clinics: 23% with GCC & India contributing 76% & 24% of revenues, respectively
Q3FY22 Results: Good numbers driven by significant improvement in footfalls across the hospitals, pharmacies and clinics.
Sales were up 18.9% YoY to | 2649.6 crore
EBITDA was at | 397.1 crore, up 21.1% YoY with margins at 15%
Consequent adjusted PAT was at | 148.3 crore (up 60.5% YoY)
What should investors do? Aster’s share price has grown by ~1.09x over the past three years (from ~| 175 in February 2018 to ~| 190.6 levels in February 2022)
Maintain BUY for a unique blend of GCC healthcare network and a quest to expand in India with calibrated capex approach
Target Price and Valuation: We value Aster DM at an SOTP of | 250
Key triggers for future price performance:
Aster is now looking to expand its network following asset light model in India, which is likely to improve its overall ARPOB
Strong RoCE in GCC due to assets light model, integrated business model, faster occupancy & strong brand equity, healthy ARPOB & targeted strategy
Increased focus on asset light retail models like diagnostics, pharmacy distribution, homecare along with push towards integrated virtual platform
It is pursuing aggressive expansion in both GCC and India via assets light model but remains on firm footing due to FCF generation from GCC
Alternate Stock Idea: Apart from Aster, in our hospital coverage we like Narayana
Narayana operates a duel model, which perfectly blends established ‘’Assetright’’ India business (more focus towards oncology, transplants, etc, besides cardiac pedigree) with a hospital in Cayman Islands
BUY with a target price of | 765
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