Buy Aster DM Healthcare; target of Rs 620: Prabhudas Lilladher

Prabhudas Lilladher's research report on Aster DM Healthcare

ASTER DM Healthcare’s (ASTERDM) Q4 consolidated EBITDA grew 18% YoY to Rs1.85bn, 5% below our estimate. The miss was on account of weak occupancy across Kerala cluster which is transient in nature. ASTERDM EBITDA has increased sharply over the last 3 years (29% CAGR over FY22-25). Our FY26- 27E EBITDA estimate broadly unchanged. We estimate 24% EBITDA CAGR over FY25-27E aided by scale-up in margins, healthy ARPOB and bed additions. ASTER DM’s board has recently approved merger with Quality care (QCIL) that makes them third largest healthcare chain by revenue and bed capacity in India. The combined entity is trading at ~23.5x EV/EBITDA on FY27E (adj. for minority stake and rental) which is discount to some of peers and unwarranted given higher growth profile, backing of marquee PE investors like Blackstone and combined entity scale of operations.

Outlook

We maintain our BUY rating with TP of Rs620/share, valuing 27x EV/EBITDA for combined entity.