Buy Aster DM Healthcare; target of Rs 700: Prabhudas Lilladher

Prabhudas Lilladher's research report on Aster DM Healthcare

ASTER DM Healthcare’s (ASTERDM) Q1 consolidated EBITDA grew 25% YoY to Rs2.1bn, 6% above our estimate. EBITDA beat was led by improved performance at Kerala cluster. EBITDA has been increasing sharply over the last 3 years (29% CAGR over FY22-25). Our FY26-27E EBITDA estimate broadly remains unchanged. We estimate 24% EBITDA CAGR over FY25-27E aided by scale-up in margins, healthy ARPOB and bed additions. ASTERDM’s board has recently approved merger with Quality Care (QCIL), making it the third largest healthcare chain by revenue and bed capacity in India. The combined entity is trading at ~26x EV/EBITDA on FY27E (adj for minority stake and rental).

Outlook

We maintain our BUY rating with a revised TP of Rs700/share, valuing 30x EV/EBITDA for combined entity.

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