Dr. Agarwal's Health Care Ltd., which recently listed on the stock exchanges, was added to Morgan Stanley's coverage with an 'overweight' rating and a bullish target price.
Citing a Crisil report that says eyecare will be one of India's fastest-growing single-specialty segments, the brokerage said the company is already a market leader and backed by a doctor-promoter team and appears well positioned to outperform.
The brokerage placed a target price of Rs 502 on Dr. Agarwal's Health Care stock, implying an upside potential of 17% to the previous close.
Patient volume growth is a key revenue driver and thus, along with consistent clinical outcomes, the eyecare business also needs a well-calibrated organic and inorganic facility expansion strategy, analysts said in a note.
"Dr. Agarwal's follows a hub-and-spoke model. Over F22-24, it increased its facility count from 106 to 180, 61% of which were acquisitions," it said.
They forecast Dr. Agarwal's to achieve a 19.3% compounded annual growth in revenue over the next three years, driven by the addition of approximately 45 new facilities per year. Operating margins may remain stable, resulting in a 19% Ebitda growth during the same period.
Furthermore, Morgan Stanley anticipates the company to reduce its debt and lower minority profits, leading to a significant 44% net income growth.
Dr. Agarwal's Health Care Stock Up
Dr. Agarwal's Health Care share price advanced 1.4% to Rs 434.65 after market opened. The benchmark NSE Nifty 50 was up 0.08%.
The stock has risen 6.7% since its debut last month. The relative strength index was at 53.
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