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Strong quarter; Merger synergies yet to reflect

ASTER DM Healthcare’s (ASTERDM) Q1 consolidated EBITDA grew 28% YoY to Rs2.7bn, 8% above our estimates; aided by strong performance across clusters. The QCIL ramp up has been on track with 32% YoY EBITDA growth for Q1. ASTERDM completed its merger with Quality Care (QCIL), effective from Q2FY27, making it the third largest healthcare chain by revenue and bed capacity in India. We remain positive on ATSERDM given the rising visibility on post-merger synergies, occupancy improvement, margin expansion and upcoming bed additions. Our FY27E and FY28E EBITDA stands increased by 3-5% for combined entity. We estimate combined entity post Ind As EBITDA to grow at 24%+ CAGR over FY26-28E to Rs31bn. The combined entity is trading at 30x EV/EBITDA on FY28E (adjusted for minority stake and rental). We maintain our ‘BUY’ rating with revised TP of Rs920/share, valuing 32x EV/EBITDA for the combined entity on FY28E

Strong 30% YoY EBITDA growth for combined entity with ~22% margins:

ASTERDM’s post-Ind AS EBITDA adjusted to ESOPs grew 28% YoY (14% QoQ) to INR 2.7bn, vs our estimates of INR 2.5bn, 8% beat to our estimate. OPM improved by 110bps YoY and 60bps QoQ to 20.4%. Pre-Ind AS EBITDA improved 30% YoY to Rs2.34bn with OPM of 17.9%. During the quarter newly commercialised greenfield unit in Kasargod reported EBITDA breakeven vs loss of INR 80mn Q4. QCIL reported post-Ind AS EBITDA of INR 3bn; improved 32% YoY with ~220 bps YoY improvement in margins at 23.2% in Q1.

Healthy 10% YoY ARPP growth; occupancy improved ~300bps QoQ:

ASTERDM’s consolidated revenue improved 22% YoY to INR 13.1bn; 6% above our estimates. Occupancy improved by 300 bps YoY and QoQ to 62% led by higher IP volume growth. Total patients’ volumes increased by 16% YoY to 1.03mn. ALOS improved by 4% YoY to 3 days. Net cash stood at INR 5.1bn as of Q1FY27. For combined entity, net debt stood at INR 11.6bn.

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