Hold Shalby Ltd For Target Rs.210 - ICICI Direct
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Strong performance amid higher Covid treatment…
About the stock: From just four hospitals in April 2012, Shalby has grown to 11 hospitals. The company also has a network of 50+ outpatient clinics across 15 states in India and abroad, which act as a separate medium to tap new patients.
* The total bed capacity at 2112 (FY21), upcoming two units in Mumbai & Nashik would add another 321 beds
* Shalby registered a blended ARPOB of | 27400 and ALOS of 5.42 days (without day care procedures) in FY21.
Q1FY22 Results: Shalby reported strong Q1FY22 results on a higher base.
* Sales were up 32.6% QoQ to | 192.4 crore
* EBITDA in Q1FY22 was at | 38 crore, up 23% QoQ with margins at 19.9%
* Consequent adjusted PAT was at | 20.2 crore (up 105.9% QoQ)
What should investors do?
Shalby’s share price has grown by ~1.3x over the past three years (from ~| 148 in July 2018 to ~| 193 levels in July 2021).
* We maintain our HOLD rating on the stock
Target Price and Valuation: We value Shalby at | 210 based on SOTP valuation
Key triggers for future price performance:
* Shalby is a market leader in arthroplasty procedure (source: F&S Report). It has ~15% market share of all joint replacement surgeries conducted by organised private corporate hospitals in India
* Shalby has a debt free balance sheet, a unique feature among hospital chains, which are on expansion mode
* The management has set an inspirational target to achieve 2.5x sales in the next three to five years on the back of introduction of franchise model, better occupancies and new service offerings (home care & Shalby Care cards)
Alternate Stock Idea: Apart from Shalby, in our hospital coverage we like Narayana
* It has 21 hospitals, five heart centres, 19 primary care facilities and a multispeciality hospital in Cayman Islands with in total 5992 operational beds
* BUY with target price of | 620
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