Buy Shalby Ltd For Target Rs.160 - Ventura Securities
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
All set for growth
Shalby Ltd (Shalby), a leading multi-specialty chain of hospitals, completed its major expansion plan to 10 hospitals (1,962 beds from 1,295 beds) in FY17. However, the slow ramp up and the onset of Covid led to low occupancies and consequently, lower return ratios. Despite the challenging times, Shalby was able to sustain a operating revenue CAGR of 16.6% to INR 699 cr over FY17-22 without compromising on margins (which are best in class).
With normalcy returning, we expect Shalby to grow its operating revenues at a CAGR of 18.4% to INR 1,159.4 cr in FY25. EBITDA and Net Profit are expected to grow at a CAGR of 25.0% and 41.5% to INR 231.2 cr and INR 151.6 cr, respectively, while EBITDA and net margins are expected to improve by 304bps (to 20.2%) and 552bps (to 13.2%), respectively. Return Ratios—ROE & ROIC — are set to improve by 639bps (to 12.5%) and 1191bps (to 20.5%), respectively. Our optimism stems from the following
• 9.4% CAGR growth in Hospitals income to INR 847.5 cr led by increase in occupancies by 200bps to 48% and 3.0% CAGR growth in ARPOB to INR 32,933. Increased contribution from non-artho surgeries (>60%) to lead to improvement in ARPOB & occupancies.
• 100% CAGR growth in Implants income to INR 248 cr. Implants business to achieve steady state margins of ?21% by FY26 with breakeven being achieved in FY23.
• Regulatory clearances on the Asha Parekh hospital, Mumbai capex to clear by Q3FY23. This 175 beds, INR 160 cr expansion is expected to be operational by early FY26. Further, the 146 bed Nashik asset to be operational by end FY23.
• Franchise-based pan India expansion of artho SOCE’s to help improve Shalby’s brand equity and replacement surgeries market share
We initiate coverage on Shalby with a BUY for a price target of INR 243 per share (FY25 PE of 17.2X), implying an upside of 80.1% from the CMP of INR 135 over the next 24 months. Risk to our estimates: 1) Inability to drive occupancies from nonmature hospitals 2) Inability to scale up the implant business
To Read Complete Report & Disclaimer Click Here
SMS subject to Disclosures and Disclaimer goo.gl/8bCMyQ
SEBI Registration No.: INH000001634
Above views are of the author and not of the website kindly read disclaimer
