Dr. Agarwals Health Care is strengthening its reach by deepening market penetration and expanding through a hub-and-spoke model, currently operating 28 hubs and 193 spokes. With a focus on established locations, it has the potential to add 40-50 centers annually.
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Motilal Oswal Report
Considering an upside of 22% in the base case scenario, we initiate coverage on Dr. Agarwals Health Care Ltd. with a Buy rating.
The hospital sector in the listed space is currently trading at an average of 22x 12 months forward EV/Ebitda. The positive factors supporting Dr. Agarwals Health Care's valuation include:
its asset-light business model,
the significant market share shift from unorganized to organized players,
the strong ophthalmology expertise of Dr. Agarwals Health Care's management,
efforts to expand its presence across regions (south, west, north, and east), and e) superior growth and profitability compared to its peers in the organized space.
However, these positives are partially offset by:
moderate return ratios in the medium term and
the existence of a separately listed subsidiary.
Based on these factors, we assign a 24 times 12 months forward EV/Ebitda multiple to the surgery/consultancy business, a 12x multiple to the pharmacy business, and a 14x multiple to the opticals business and adjust for a non promoter stake in AEHL/Dr. Thind to arrive at our target price of Rs 510.
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