PL Stock Report: Aster DM Healthcare (ASTERDM IN) - Q1FY24 Result Update - Strong growth across GCC segments - BUY

Aster DM Healthcare (ASTERDM IN) - Param Desai - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: BUY | CMP: Rs307 | TP: Rs345

Q1FY24 Result Update - Strong growth across GCC segments

Quick Pointers:

♦ GCC restructuring– progressing well however given complexity of transaction process is taking longer than expected.

♦ Adjusted for one off and losses in new units; EBITDA came at Rs4.04bn.

Our FY24E and FY25E EBIDTA stand increased by ~2%. ASTER DM’s Our FY24E and FY25E EBIDTA stand increased by 4-5%. ASTER DM’s consolidated EBIDTA (Post IND AS) grew 33% YoY (down 23% QoQ) to Rs 3.9bn; 13% above our estimates. ASTERDM has a unique business model with presence in India and an established business with strong returns in GCC. We expect 17% EBIDTA CAGR over FY23-25E, 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 9x FY25E EV/EBIDTA (Pre IND AS), which is at 25-50% discount to Indian peers. Timely stake sale of GCC business will re-rate and lower gap with peers. We maintain our ‘Buy’ rating with TP of Rs. 345/share (earlier Rs 335/share) based on 18x FY25E EV/EBIDTA to India business and 8x EV/EBIDTA to GCC business.

♦ EBIDTA above est aided by GCC hospital biz: India business EBIDTA (Post Ind AS) was up 46% YoY (down 3% QoQ) to Rs. 1.2bn, while GCC hospital EBITDA increased by 28% YoY (14% QoQ) to Rs 1.7bn; above are estimate. India hospital biz reported OPM of 18.7% (down 65bps QoQ) while GCC hospital biz reported OPM of 15.6%; up ~200bps QoQ. New hospitals in GCC contributed EBIDTA loss of Rs. 100 mn vs Rs.110mn in Q4. Further there was one-time restructuring cost to tune of Rs60mn. Segment wise, GCC pharmacy and clinics reported strong EBITDA growth of 31% YoY and 25% YoY; respectively. Consolidated margins were up 110 bps YoY to 12.1%.

♦ Strong ARPOB; net debt increased by 1.6bn QoQ: Revenue grew by 21% YoY (down 1% QoQ) to Rs 32.2bn; 8% above our estimates. India revenues were up 29% YoY (4% QoQ) to Rs. 8.4bn. ARPOB for India business was increased 9% YoY (4% QoQ) to Rs 39.4K per day. India and GCC hospitals occupancies were at 64% and 51% in Q1. Net debt inclined by Rs.1.6bn QoQ to Rs 20bn; of which India debt amounted to Rs.5.7bn.

♦ Key con-call takeaways: (1) Civil and interior work of Saudi hospital (59 beds) at Sanad (annex building) is completed and will be operationalized in Q2FY24. (2) Phase 2 of 275 beds in Bangalore and 140 beds in Kollam to be operational in Q2FY24. 100 beds of Madegowda Hospital in Mandya, Karnataka commenced its operations in Q1FY24 at revenue run rate of Rs. 35mn per quarter (3) AsterDM added total 530 beds under O&M asset-light model in less than 2 years. (4) EBIDTA and PAT losses from new hospitals in GCC amounted to Rs.100mn and Rs. 290mn; respectively. (4) As per new tax regime in GCC, one-time corporate tax adjustment was at Rs.430mn. (5) Guided Aster labs India biz to be EBIDTA breakeven over next 3-4 months (6) Excl. O&M hospitals occupancy was at 67%. July occupancy saw at 68% and guided to have strong occupancy for Q2 for India units. Guided 8-10% ARPOB growth YoY for India units.

(Click on the Link for Detailed Report)