Buy Metropolis Healthcare; target of Rs 2250: ICICI Securities

BUY

ICICI Securities's research report on Metropolis Healthcare

Metropolis’ Q3FY25 result was impacted by lower sales from institutional biz (2% impact on revenue) and muted growth in acute ailment tests. In last 4 years, Metropolis has widened its lab network by 68% to 209 labs in 9MFY25. With sufficient lab network in place, the company’s focus ahead is on adding spokes and the target is to have 30 collection centres per lab as against 21 currently. Besides, new lab additions have dented its EBITDA margin by 100-150bps and the impact is likely to reverse ahead on the back of price hikes and operating leverage. Acquisition of Core Diagnostics may complete by end of Feb’25 and by FY28 its margins may become similar to Metropolis’. Management guides for organic revenue growth of 13% with EBITDA margin of <25% in Q4FY25.

Outlook

The stock currently trades at valuations of 38.4x FY26E and 31.0x FY27E earnings and EV/EBITDA multiple of 20.0x FY26E and 16.7x FY27E. We upgrade our rating to BUY (earlier Add) on the stock with DCF-based target price of INR 2,250 (earlier INR 2,335).

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