Narayana clocked largely in line quarter as guided in the April update and subsequent Q4 call. While EBIDTA loss was expected given that April revenue run rate was just 35% of pre COVID level (with pick up in May and June), management remains cautious on revival due to high degree of uncertainty. Costs cuts, like in pharma, would be visible but no permanent savings feasible; as revenues rebound, so will costs. With no visibility on resumption of international flights and uncertainty on domestic rebound in elective surgeries, FY21 will be a wash-out year as expected with strong recovery built in FY22.
OutlookWe raise our FY22 estimates (~+9%) and retain Reduce mostly due to lack of comfort on valuation as we reckon hospital players should trade at a discount to branded pharma companies especially those with sizable India revenues. Key risk to our EBIDTA/EPS estimates is faster than expected 27% growth in hospitals revenues assumed in FY22.
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