INDRAPRASTHA MEDICAL CORPORATION Stock Research Report by HDFC Securities
Sector: Hospital & Healthcare Services
CMP Rs. 83.1, Target Rs. 99.5 (20% upside potential)
Target Period: 12 Months
Indraprastha Medical Corporation Stock Research Report:
A lot of factors favour the Indian healthcare sector which has driven our positive outlook towards it. This includes the recent initiatives taken by the Government such as Ayushman Bharat, National Digital Mission, etc., rising income levels, ageing population, greater awareness of personal health and hygiene, rising penetration of health insurance, technological advancements. Further, the Indian healthcare industry has grown exponentially by addressing the multibillion-dollar medical value travel opportunity. India has emerged as one of the most preferred destinations for patients across the globe in seeking medical assistance.
Indraprastha Medical Corporation (IMCL), a JV between Apollo Hospitals Enterprise Ltd. (holds 22% stake) and the State Government of Delhi (Government holds 26% stake) is a 764-bedded, super specialty tertiary care hospital with 52 specialty departments. Transplants, cardiology, oncology, neurology and orthopedic with higher revenue prospects are some of the key specialty departments of the hospital. The company has impeccable track record, long presence as well as quality of medical care supported by long term relationships with its doctors and other medical professionals. It drives significant tangible and intangible benefits from “Apollo” brand value. Over the years, the company has brought in best in class technologies for its patients and with the changing preference of the customers i.e. Ask Apollo and Apollo 24/7. Clinical Excellence is the cornerstone upon which the company’s healthcare operations are built. This has allowed it to continuously assess the quality of care provided to its patients and objectively measure the consistency and success of its healthcare delivery services. This has contributed significantly to the group’s illustrious track record, allowing it to achieve high success rates even in the most difficult surgeries, such as transplants, cardiac care, and oncology.
We feel that IMCL is a fundamentally strong candidate in the Indian healthcare industry which has immense growth potential, has an established presence in Delhi and NCT, has a strong brand image, healthy financials, asset light business model and lower capex needs.
Geographic concentration, government regulations and ongoing litigations regarding free treatment to poor patients continue to remain key concerns for the long term investment in the company.
Previously, we had issued an initiating coverage report on IMCL dated 31st October, 2022 and recommended Buy at LTP of Rs.67.6 and add more on dips to Rs.59 band, for the base case fair value target of Rs.75.75 and the bull case fair value target of Rs.83.25 over the next 2-3 quarters. The target for this was reached on 7th November, 2022.
INDRAPRASTHA MEDICAL CORPORATION Stock Research Report: Valuation & Recommendation:
During the pandemic, lock downs impacted the healthcare companies in India severely. There was a significant drop in patient footfall—be it a single speciality, multi-speciality, tertiary-care hospitals or even diagnostics businesses. Financial performance of IMCL was also impacted due to the same, however, as the situation has stabilized, the company’s business has also got back on track. There was ~45% jump in revenue in FY22 and margins again also improved to ~13% in FY22 v/s 6.6% in FY21. The company has negligible debt on balance sheet and has been paying healthy dividends to its shareholders. We have envisaged 18% CAGR in revenue and 32% CAGR in net profit over FY22-25E.
We believe the base case fair value of the stock is Rs. 93 (7x FY25E EPS) and the bull case fair value of the stock is Rs. 99.5 (7.5x FY25E EPS) over the next 2-3 quarters. Investors can buy the stock in the range of Rs. 82-84 and add on dips to the range of Rs.72-74 ~ (5.5x FY25E EPS). At the LTP, the stock is trading at 6.3x FY25E EPS.
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