Buy Aster DM Healthcare; target of Rs 265: Prabhudas Lilladher

Prabhudas Lilladher's research report on Aster DM Healthcare

ASTER DM’s consolidated EBITDA (post IND AS 116) de-grew 7% YoY (up 9% QoQ) to Rs 3.2bn; 13% below our est. of Rs 3.6bn. GCC hospital EBITDA declined by 10% YoY (flat QoQ) to Rs 1.3bn, while India business EBITDA (post Ind AS) was up 22% YoY (51% QoQ) to Rs. 1.3bn. ASTERDM has a unique business model with presence in India and an established business with strong returns in GCC. We expect 9% EBITDA CAGR over FY22-25E, as margin in its India business will gradually improve with brownfield expansion and new hospitals ramp-up in GCC. At current market price, the stock trades at an attractive valuation of 10x FY24E EV/EBITDA, which is at 25-50% discount to Indian peers. We believe such high discount reflects ASTERDM’s lower contribution from India region and higher capital outlay outside India. Also, such steep discount is unwarranted given stable profit trajectory and increasing contribution from India. Our FY23E and FY24E EBITDA stand reduced by 6-8%.

Outlook

We maintain our ‘Buy’ rating with TP of Rs. 265/share (earlier Rs 234/share) based on 18x FY24E EV/EBITDA to India business and 8x EV/EBITDA to GCC business.