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Our view:

Narayana clocked a modest improvement qoq at +3% revenue growth though YoY comparison would not be appropriate given the virtual shutdown of surgeries last year. Company is putting lot of focus in building international business in Cayman with earlier guided capex commitment of US$100mn along with ambition in other Caribbean geographies. India business is firmly on recovery path (with July domestic revenues at all time high), though normalization of case mix would have some impact on domestic margin.

Cayman Island revenues have been on a sharp upswing but even more critical to watch is the sustainability of EBIDTA embedded in those revenues. In a more normalized state of operations, Cayman EBIDTA can correct from current likely elevated levels; albeit, cognizant that since company will be funding oncology capex through Cayman operations, it is not betting on a reversal anytime soon. Yet, lowering of such margins is not completely ruled out given that there are no structural drivers to support a permanently higher EBIDTA., at least not till steady utilization of oncology unit.

Q1 FY22 was a surprise on tax front and also with better EBIDTAR for existing (15%) & new hospitals (‐0.5%). This results in a sharp ~35% rise in FY22 estimates though FY23 EPS remain largely unchanged. We introduce and roll over to FY24 EPS translating in to revised TP Rs440 (Rs380 earlier) on an unchanged 13x FY24 EV/EBIDTA. Reduce stays as optimism on international business EBIDTA may carry higher degree of risk of reversal. 

Result Highlights

* Better EBIDTAR performance at existing & new hospitals led to improved OPM

* Cayman revenues bump to US$23mn, strong jump of 27% qoq

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