Buy Narayana Hrudayalaya; target of Rs 585: ICICI Direct

ICICI Direct's research report on Narayana Hrudayalaya

Narayana posted strong QoQ, YoY growth, better than our estimates across all fronts. Revenues grew 12.8% YoY to Rs 838 crore with India sales growing 9.5% YoY to Rs 700 crore. Revenues from Cayman operations grew 30.6% YoY to US$18.5 million due to lower base and strong ARPOB traction. On the EBITDA front, margins expanded 399 bps to 16.9% amid lower employee & other expenditure. Subsequently, EBITDA grew 47.7% YoY to Rs 141 crore. Adjusted PAT for the quarter was at Rs 68 crore, nearly 3x Q4FY20.

Outlook

We maintain BUY recommendation and arrive at an SOTP target price of Rs 585 (earlier Rs 545) by valuing matured hospitals and Cayman Islands at 16x FY23E EV/EBITDA, new hospitals at 1.5x and other business at 1x FY23E EV/sales.