Hold Rainbow Childrens Medicare Ltd For Target Rs.900 - ICICI Direct
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Significant beat across all parameters...
About the stock: Rainbow Children’s Medicare (RCML) is a leading chain of paediatric multi-speciality and perinatal hospitals in India, operating 16 hospitals and three clinics in six cities, with a total bed capacity of 1,655 beds.
* Paediatric: Perinatal revenues break-up- 70:30
* Revenue, EBITDA grew at CAGR of 21.3%, 24.2%, respectively, in FY19-23
* Healthy return ratios with last three-year’s average RoE, RoCE of 15.1%, 15.2%, respectively
* RCML registered blended ARPOB of | 48,932 with occupancy at 55.40% and ALOS at 2.76 days for FY23
Q4FY23 Results: Significant beat across all parameters.
* Rainbow Children's revenue grew 3.4% QoQ to | 317 crore led by occupancy levels in matured hospitals, which reached 67.18%
* EBITDA de-grew 8.2 % to | 98 crore
* PAT came in at | 53.6 crore
What should investors do? RCML’s share price grew by 92% since listing.
* We downgrade from BUY to HOLD as current price more or less factors in the FY25 earnings based on our estimates
Target Price and Valuation: We value RCML at 19x FY25E EV/EBITDA to arrive at a target price of | 900.
Key triggers for future price performance:
* Expertise in the most case-sensitive healthcare cohort that is paediatric and perinatal care encompassing areas like neurology, nephrology, oncology and cardiology among others
* Following of hub & spoke model approach for expansion in new areas to aid growth, accessibility for patients
* Progress on Gurugram greenfield expansion of | 450 crore
* Progress and profitability of new hospitals in Hyderabad, Bangalore, New Delhi among others
Alternate Stock Idea: Apart from RCML, in our hospital coverage we like Narayana
* Narayana operates a dual model, which perfectly blends established ‘’assetright’’ India business with a hospital in Cayman Islands
* BUY with a target price of | 870
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