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Business News/ Markets / Stock Markets/  Up 36% from IPO price, SMIFS sees another 60% upside in this hospital stock

Up 36% from IPO price, SMIFS sees another 60% upside in this hospital stock

SMIFS maintains a ‘buy’ call on Yatharth Hospital with a target price of ₹650, citing growth potential. Stock is trading at a comfortable valuation with significant growth opportunities in the local market. The company also reported strong performance in FY24.

SMIFS maintains a ‘buy’ call on Yatharth Hospital with a target price of ₹650, citing growth potential. (REUTERS)Premium
SMIFS maintains a ‘buy’ call on Yatharth Hospital with a target price of 650, citing growth potential. (REUTERS)

Domestic brokerage house SMIFS believes Yatharth Hospital and Trauma Care Services is poised for growth with rising occupancy and gains in average Revenue Per Occupied Bed (ARPOB).

It has retained its ‘buy’ call on the stock with a target price of 650, implying an upside of 60 percent from its current market price of 406.75, as on May 27, 2024.

"Currently, the stock is trading at a comforting valuation on FY26E EV/EBITDA of 12.7x. Given Yatharth's significant growth opportunities in its local market and its pledge to increase revenue without sacrificing return ratios, there's a clear sign that the gap in valuation from peers is likely to wane in the coming times. We value the stock at 20x and arrive at a target price of 650 per share," said the brokerage.

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The stock, which was listed in August last year, has gained 36 percent from its issue price of 300. It hit its record high of 503.90 on February 28, 2024, but has slid over 19 percent from its peak since then. However, it continues to trade around 34 percent higher from its 52-week low of 304, hit on August 7, 2023, its listing day.

Just in 2024 YTD, the stock is up 8 percent, giving positive returns in 3 of the 5 months so far. It has lost 8.4 percent in May so far after a 6 percent gain in April. In March as well, the stock dipped 10.6 percent but it was positive for the first 2 months of the current calendar year. It rallied 24 percent in February and was flat but in the green in January, up 0.5 percent.

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In the March quarter (Q4FY24), the company reported a 121 percent year-on-year (YoY) surge in consolidated net profit at 38.3 crore as against 17.3 crore in the same quarter last year. The hospital’s revenue from operations also increased 24 percent YoY to 177.8 crore in Q4FY24 versus 143.8 crore in Q3 FY24.

Sequentially, the company's net profit grew 30 percent while revenue rose 7 percent.

Commenting on the performance, Yatharth Tyagi, whole-time director of Yatharth Hospital, stated that the year has been transformative for the company as it solidified its position as a premium super-specialty institution.

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“We have also expanded our organ transplant program, with international patients in liver transplants, and inaugurated our state-of-the-art radiation oncology department," he added.

The company also announced the commencement of operations at their newly acquired hospital in Faridabad, further strengthening its presence in the Delhi NCR market. “This acquisition aligns seamlessly with our overarching strategy of expanding our footprint in the North India region," Tyagi said.

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Reviewing its March quarter results, the brokerage noted that Yatharth Hospital reported a strong performance, with operational performance aligning with estimates, while PAT exceeded expectations due to a lower tax outgo, attributed to the acquisition of Faridabad Hospital.

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"Occupancy is expected to rise from 54 percent in FY24 to 64 percent in FY26E. ARPOB is expected to grow at a CAGR of 6.3 percent from FY24 to FY26E, driven by an improved case mix and inpatient growth. The oncology and transplant business has shown strong growth, leading to a significant case mix improvement. The share of internal medicine dropped to 21 percent in Q4 FY2024, compared to 28-30 percent for the full year. Radiation oncology, which started in Q4, has positively impacted ARPOB, with further increases expected as volumes grow," it noted.


Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 28 May 2024, 01:55 PM IST
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