Buy Aster DM Quality Care Ltd for the Target Rs 875 by Prabhudas Liladhar Ltd
Merger synergies on track
ASTER DM Healthcare’s (ASTERDM) Q2 consolidated EBITDA grew 27% YoY to INR 6.6bn, 5% above our estimates; aided by strong performance across clusters. The QCIL ramp up has been on track with strong YoY EBITDA growth for H1. 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 ASTERDM given the rising visibility on post-merger synergies, occupancy improvement, margin expansion and upcoming bed additions. Our FY28E and FY29E EBITDA stands increased by 2-3% for combined entity. We estimate combined entity post IND AS EBITDA to grow at +24% CAGR over FY26-29E to +INR37bn. The combined entity is trading at 23x EV/EBITDA on Sept 2028E (adjusted for minority stake and rental). We maintain our ‘BUY’ rating with revised TP of Rs875/share, valuing 26x EV/EBITDA for the combined entity on Sept 2028E.
Strong 27% YoY EBITDA growth for combined entity:
ASTERDM’s post-Ind AS EBITDA ~27% YoY to INR 6.6bn, vs our estimates of INR 6.3bn, 5% beat to our estimate. OPM improved by 150bps YoY to 23.4%. For H1, Post-Ind AS EBITDA stood at INR 12.2bn (up ~28% YoY), with OPM at 22.5%. Pre-Ind AS EBITDA improved 28% YoY to INR 6.2bn with OPM of 21.9% in Q2. For H1FY27, Mature units’ revenue grew at 18% YoY, supported by steady patient volume growth, while Emerging units (includes Kasargod and Nagercoil) grew 62% YoY supported by higher IP & OP volumes. The normalised PAT increased 34% YoY to INR 2.8bn during the quarter, while normalised PAT grew 27% to INR 4.6bn in H1.
Occupancy improved ~335bps YoY:
ASTERDM’s consolidated revenue improved 19% YoY to INR 28.3bn; we estimated INR 27.5bn. For H1, the consolidated revenue stood at INR 54.3bn, up ~20% YoY. Occupancy improved by 335 bps YOY to 68% led by patient volume growth in key specialties. Total patient volumes increased by 12% YoY to 2.18mn. All clusters reported double-digit revenue growth in Q2, led by Kerala and Tamil Nadu at 23%, followed by South-West and Central at 16% and South-East at 13%. MVT revenue grew 36% YoY, led by Maldives, GCC markets and West Africa. ALOS remained stable YoY at 3.3 days, while CONGO revenue grew 16% YoY. During the quarter, ASTERDM commissioned 32-bed CARE Cancer Institute in Raipur.
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SEBI Registration number is INH000000933
