Aster DM Healthcare Stock Gets Target Price Upgrade By PL Capital, Maintains 'Buy', Here's Why

PL Capital Report

We maintain our Buy rating on Aster DM Healthcare Ltd. with revised target price of Rs 620/share, valuing 27 times enterprise value/Ebitda for combined entity.

Aster DM board has approved merger with Quality Care that makes them third largest healthcare chain by revenue and bed capacity in India. The deal was transacted at swap ratio of 57.3: 42.7 in favor of Aster shareholders.

We believe transaction was done at 26% premium from Aster DM relative to Quality Care despite similar pre IND AS Ebitda adjusted for minority based on FY25E, which is justified and done at fair value in our view given higher growth profile for Aster DM.

Our back of envelope calculation suggest ~Rs 20 billion Ebitda in FY27E versus Rs 10.8 billion in FY24 for combined entity adjusted for rental and minority. This implies 24% Ebitda CAGR over FY24-27E.

The combined entity is trading at 21.5 times EV/Ebitda on FY27E which is still at 10-20% discount to some of peers, which is unwarranted given higher growth profile, backing of marquee PE investors like Blackstone and combined entity scale of operations.

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