This Healthcare Stock Has A “BUY” Call From Edelweiss With A Target Price of Rs 3,753

The stock of Metropolis Healthcare Ltd has been recommended to buy by Edelweiss Broking Ltd with a target price of Rs 3,753 against the current market price of Rs 3,070, resulting in a 22 percent growth. Metropolis Healthcare Limited is a well-known and well-established diagnostics company in India. The firm has a diagnostic centre system across India, South Asia, Africa, and the Middle East. According to the brokerage Metropolis Healthcare (METROHL) reported marginally miss in our estimates. Revenue grew by 5% YoY to INR 303cr, ~4% lower than our estimates. EBITDA reported INR 90cr (down ~1% YoY & ~4.5% below our estimates) and EBITDA margin of 29.8% contracted 170bps YoY vs our estimates of 30%. Edelweiss has said METROHL reported non-COVID revenue of INR 260cr (up ~38% YoY and down 2% QoQ) Vs 33%/22% YoY growth for Dr Lal/Vijaya, on account of unlocking of economy and easing of covid19 restrictions. METROHLs Q2FY22 Non-COVID realization per test/patient (up 7%/12% YoY), Non-COVID patient volume up 23% YoY and test volume up 28.6% YoY. Based on the research report of the brokerage the companys EBITDA margin contracted by 170bps YoY to 29.8% (v/s est. 30% and 28.4% of Dr Lal) and excluding CSR & ESOP expenses EBITDA margin was 30.8%. PAT reported INR 58cr (down ~3% YoY) against our estimates of INR 61cr. Edelweiss has clarified METROHLs COVID revenue down by 57% YoY to INR 43cr with the reduction in COVID cases. METROHLs Q2FY22 Non-COVID realization per test/patient (up 7%/12% YoY), Non-COVID patient volume up 23% YoY and test volume up 28.6% YoY. Revenue contribution from specialised tests (non-covid) increased to 43% in Q2FY22 from 39% in Q2FY21. The share of B2C business (non-Covid revenue) in focus cities stood at 60% in Q2FY22, which management aims to increase to 65% in the coming years.Advertisement Edelweiss has reported that The company has reported results marginally lower than our estimates while non-COVID business in H1FY22 has come back strongly, revenue up 80% YoY against 54% for Dr Lal and EBITDA margin also maintained at ~30% indicates METROHLs premium business model and dominant market share in major geographies (where it is present). The strong expansion plans along with Hitech acquisition would be healthy growth drivers for the company in the coming years. However, entry of Dr Lal through Suburban in Mumbai market would create some challenges for the company. The brokerage has claimed that We have consolidated Hitech numbers in our estimates, thus, we have revised our earnings estimate upwards for FY23E by 19%, and also introduced FY24 estimates. The stock is currently trading at 62x/49x/44x FY22E/FY23E/FY24E earnings. Maintain BUY with a revised target price of INR 3753 (earlier INR3,356) (DCF-based). The above stock is picked from the brokerage report of Edelweiss Broking Ltd. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.