Narayana Hrudayala - Q4 FY21 Result Update - YES Securities

(Rating: Reduce , TP: Rs380, Downside: 25%)

- We reckon several moving parts would pull in differing directions casting an impact on FY22 earnings

- As pandemic eases, leading to a revival in international patient inflow, this could lead to a decline in Cayman Island margin with the extent depending on pace of patient inflow. In domestic business, the return of government patients and lower ICU bed usage (especially compared to H2 FY21) would adversely impact mix and ARPOB

- Hence, we have cut FY22 estimate by 15% and expect a more normalized year of operations in FY23 with 1) Cayman Island margin above FY20 (last 'normal' year) base 2) three new hospitals break even and 3) existing hospitals margin move to 25%.

- We raise our target EV/EBIDTA multiple to 14x from 12x earlier with revised TP Rs380 (earlier Rs325) on increased earnings optimism in FY23 and receding capital allocation risk in India. However, we reckon extant valuation of over 18x EV/EBIDTA adequately factors in the growth in FY23.

- Moreover, stock trades at a premium EV/EBIDTA to formulation players who are leaders in chronic/acute categories with a more robust and sustainable ROE/cash flow generation business. Continue to like the franchise, but lower valuation would be more palatable for an entry in to the stock. Reduce stays.

Shares of Narayana Hrudayalaya Ltd was last trading in BSE at Rs.487.95 as compared to the previous close of Rs. 504.9. The total number of shares traded during the day was 75524 in over 3430 trades.

The stock hit an intraday high of Rs. 514.25 and intraday low of 485. The net turnover during the day was Rs. 37565292.

Source : Equity Bulls

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