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Narayana Hrudayalaya
Narayana Hrudayalaya reported highest ever profitability in Q1 from its India biz which is sustainable.
According to Prabhudas Lilladher there could be a decline in Cayman profitability as blip and should recover from Q2.
“Our FY23E and FY24E EBITDA stands increased by 7% and 6%. NARH continues with aggressive capex plan across India and Cayman operations over next 2-3 years. This enhances growth visibility beyond FY24 however, in near term it may increase debt and impact return ratios. We maintain a ‘Buy’ rating with target price of Rs. 810 per share (earlier Rs773/share), based on 20x FY24E EV/EBITDA for India business and 16x EV/EBITDA for Cayman hospitals. At CMP, stock is trading at 16x EV/EBITDA (adj for IND AS) and 26x P/E on FY24E. We expect EBITDA CAGR of 21% over FY22-24E. Despite capex intensity going up, RoE/ RoCE will remain healthy at 25% by FY24E,” the brokerage has said.
Narayana Hrudayalaya: Decent capital outlay
The company has a capital outlay for India and Cayman on track to tune of Rs10 bn in FY23 however running slightly behind schedule, according to Motilal Oswal.
The spend Rs1.1bn in Q1 (2) From FY23 onwards, Jaipur hospital will be the part of Northern group and Raipur hospital will be the part of Eastern Peripheral
Three new hospitals across NCR and Mumbai contributed revenue of Rs.1.05bn and positive EBITDA margin of 6.5% in Q1. Mumbai unit currently enjoys occupancy of +65%.
Cayman revenues and profitability impacted
Cayman- revenues and profitability was impacted in Q1 due to COVID restrictions and delaying to get visas in terms of getting key talent onboard. Expect normalization from Q2 onwards, according to Prabhudas Lilladher.
“Radiation oncology will be commercialized from Q4FY23 end (5) Combination of high end tertiary and clinical work driving higher ARPOB and margins with lower ALOS. Guided ALOS reduction to 4.1from current levels of 4.6 in next 6-8 quarters. This would be achieved through implementing digital initiatives, upgrading machines in Bangalore, Howrah and Jaipur units. Currently, Narayana Hrudayalaya is exploring and evaluating inorganic opportunities in key markets like in Bangalore,” the brokerage has said.
Buy Cummins India stock, says Prabhudas Lilladher
Cummins India reported robust revenue growth of 42.4% YoY to Rs16.9bn, while gross margins were impacted (down 332 bps YoY) due to change in revenue mix (higher contribution of LHP in exports business) and commodity inflation. Though better absorption of fixed cost aided EBITDA margins (flat YoY at 12.7%).
“However, with commodity price softening, price hikes and better revenue mix, margins are expected to improve going forward. Demand is witnessing double digit growth from end users. Exports market likely to continue its strong traction in key geographies like Middle East, Latin America, and Asia Pacific, from segment such as infrastructure, data center, telecom etc. Domestic powergen and industrial segment outlook continues to remain strong from sector such as infrastructure, residential reality, pharma, biotech, mining, defense and railways. Though demand from end markets continue to remain healthy, supply chain disruptions may likely impact performance of the company in near term,” the brokerage house has said.
