Buy Narayana Hrudayalaya; target of Rs 965: Prabhudas Lilladher

Prabhudas Lilladher's research report on Narayana Hrudayalaya

We upward revise our FY24/FY25E EBIDTA by 3%/2%, as we factor in higher growth from India segment. Narayana Hrudayalaya (NARH) reported another quarter of strong EBITDA growth at Rs2.54bn (45% YoY and 4% QoQ), 17% beat to our estimate, aided by India business EBIDTA at Rs1.6bn (up 58% YoY and 6% QoQ). We expect growth momentum to sustain. The company plans to continue with its aggressive capex plan for next 2-3 years, guided by capex of Rs.10bn annually in FY23E and FY24E. More importantly capex spend would be towards its core and high performing regions such as Bangalore, Kolkata and Cayman.

Outlook

Maintain ‘BUY’ rating with a revised TP of Rs. 965/share (earlier Rs920/share), based on 20x FY25E EV/EBITDA for India business and 12x EV/EBITDA for Cayman hospitals. At CMP, stock is trading at attractive valuations of 13x EV/EBITDA (adj for IND AS) and 20x P/E on FY25E. Faster ramp up in new Cayman unit will be a key.

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