Buy Narayana Hrudayalaya; target of Rs 855: ICICI Direct

ICICI Direct's research report on Narayana Hrudayalaya

Narayan a Hrudayalaya operates a chain of multispecialty, tertiary & primary healthcare facilities that initially focused on cardiac & renal but expanded to cancer, neurology, neurosurgery, orthopaedics & gastroenterology facilities. NHL’s network comprises 21 hospitals (including two managed hospitals), four heart centres, 18 primary care facilities (including clinics and information centres) and a multi-speciality hospital in Cayman Islands) • Revenue mix FY22 – India: Rs 2965.5 crore; (Bengaluru:31%, Southern Peripheral:7%, Kolkata:27%, Eastern Peripheral: 5%, Western: 16%, Northern: 13%); Cayman Islands: US$91.9 million.

Outlook

We maintain BUY due to 1) pick-up in occupancy levels and ramp-up in new hospitals, 2) consistent performance at Cayman Islands and 3) judicious plan to expand at existing hospitals nearing full utilization. We value Narayana at an SOTP of Rs 855 by valuing matured India & Cayman hospitals at 15x & 14x FY24E EV/EBITDA respectively, heart centres at 10x FY24E EV/EBITDA and other business at 1x FY23E EV/sales.