Prabhudas Lilladher has given Buy recommendation for Narayana Hrudayalaya with a target price of Rs. 810 in its research report issued on Sep 06, 2022

Prabhudas Lilladher’s research report on Narayana Hrudayalaya

Narayana Hrudayalaya (NARH) recently signed an agreement with Shiva and Shiva Orthopaedic Hospital to acquire its 100 beds Orthopedic and Trauma Hospital in Bengaluru on slump sale basis for Rs2.8bn (Rs800mn to be recovered after 4 years). Though acquisition looks expensive, it will offer entire spectrum of services in Health City. We see limited impact on financials given small deal size, besides the said acquisition is in-line with guidance of Rs10bn capex as guided by mgmt. for FY23. We believe NARH’s aggressive capex plans in India along with Cayman operations over next 2-3 years will enhance growth visibility beyond FY24. Additionally, company’s ability to generate healthy margins/profitability in new Cayman unit will be a key monitorable. We are factoring $10mn EBITDA from Cayman’s new unit in FY24.


Overall we expect EBITDA CAGR of 22% over FY22-FY24E and maintain ‘Buy’ rating at TP of Rs. 810/share, based on 20x FY24E EV/EBITDA for India business and 16x EV/EBITDA for Cayman hospitals. At CMP, the stock is trading at 16x EV/EBITDA (adj for IND AS) and 27x P/E on FY24E.

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