(I) Quick Pointers:
- Strong profitability across GCC hospitals and pharmacy biz aided Q4 growth.
- Off Rs6bn annual capex over next 3 years, Rs3bn earmarked for India operations.
ASTERDM reported consolidated result of EBIDTA of Rs 4.6bn (up 44% YoY; ~17% QoQ) vs est Rs3.9bn. GCC hospital business reported healthy profitability with EBIDTA growth of 35% QoQ to Rs1.9bn, while India hospital business reported EBIDTA decline of 6% QoQ in line with our estimates.
ASTERDM has a unique business model with presence in India and an established business with strong returns in GCC. We expect 10% EBITDA CAGR (pre IND AS) over FY22-24E, as margin in its India business will gradually improve with brownfield expansion and new hospitals ramp-up in GCC.
At current market price, the stock trades at an attractive valuation of 7x FY24E EV/EBITDA, which is at 25-50% discount to Indian peers. We believe such high discount reflects ASTERDM’s lower contribution from India region and higher capital outlay outside India. Also, such steep discount is unwarranted given stable profit trajectory and reduction in leverage.
We maintain our estimates and ‘Buy’ rating with TP of Rs234/share based on 15x FY24E EV/EBITDA to India business and 7x EV/EBITDA to GCC business.
Consolidated margins improved 200bps QoQ to 17%. Other income came in higher at Rs220mn. PAT came in higher at Rs2.3bn, vs our est of Rs1.2bn. Revenue grew by +14% YoY to Rs27.2bn. GCC hospital biz reported OPM of 20%; up 120 bps YoY while India hospital biz reported OPM of 16.1% (down 70 bps QoQ).
ARPOB (average revenue per occupied bed) for India business improved by 9% QoQ to Rs 36.7K per day. Segment wise, pharmacy reported strong EBIDTA growth of 67% YoY, above our estimate, while clinics reported 6% YoY EBIDTA growth. Net debt reduced by Rs.1.1bn to Rs18bn; of which India debt amounted Rs.3.2bn.
(II) Key con-call takeaways:
- (1) Margin guidance – Management guided existing hospital to deliver consistent margins for FY23, however, Clinics business could see a drop of 50bps due to lower RTPCR revenue. Around 33% of revenue came from RTPCR in FY22 in clinic business
- Overall, margin expansion expected on improved efficiency and brownfield business expansion in FY23 as most of the greenfield bed capacity additions would be commissioned in FY25-26.
- Q1 likely to soft for GCC operations given seasonality led by impact of festive season (Ramzan and Eid).
- Expansion of bed capacity – ASTERDM targets to add minimum 500-1,000 beds through O&M asset light model in Kerla, Karnataka and AP-Telangana in FY23. Overall, bed capacity to increase from 3900 to 4400 beds by FY23 excluding previous brownfield announcement for India business. For GCC business, 100 beds got commercialized in Sharjah in April month while Oman greenfield project (planned beds: 145) to be completed by Q1FY23.
- Capex guidance- The company plans to spend Rs.6bn each year for next 3 years of which Rs3bn will be towards India business
- Total outlay for digital spend – Rs1.8bn of which Rs560m spend so far.
Shares of Aster DM Healthcare Limited was last trading in BSE at ₹174.45 as compared to the previous close of ₹177.45. The total number of shares traded during the day was 31193 in over 939 trades.
The stock last hit in BSE,
- Intraday High of ₹ 176.00
- Intraday low of ₹ 168.35