Hold Shalby; target of Rs 70: ICICI Direct

ICICI Direct's research report on Shalby

Q4FY20 revenues de-grew 4.1% YoY to Rs 109 crore impacted by loss of few business days due to Covid-19 related disturbances. EBITDA margins posted a steep decline of 1100 bps to 2.3% (13.4% in Q4FY19) due to negative operational leverage. Subsequently, EBITDA declined 83.4% YoY to Rs 2.5 crore. Despite higher other income, higher tax outgo (Rs 19 crore vs Rs 3.6 crore in Q4FY19) contributed towards registering a loss of Rs 17.1 crore for the quarter. On a full year basis, revenues grew 5.6% to Rs 487 crore with EBITDA margins contracting 104 bps to 16.8% mainly due to lower gross margins whereas EBITDA remained flat at Rs 82 crore.

Outlook

However, skewed margins, weak return ratios are still major concerns. We value the company on an SOTP basis by valuing hospitals (above six years) at 6x FY22E EV/EBITDA and hospitals (below six years) at 1x FY22E EV/sales. We arrive at an SOTP target price of Rs 70. Ramp up in below six years hospitals will be key to watch for re-rating.

Shalby 23062020-icici

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