Narayana Hrudayalaya hits record high on healthy outlook; stock surges 9%

Analysts believe that Narayana Hrudayalaya's revenues will increase by around 8 per cent QoQ to Rs 1,117 crore amid continued traction for elective surgeries.

Shares of Narayana Hrudayalaya surged 9 per cent to hit a record high of Rs 795 apiece in Friday’s intra-day trade, on healthy outlook. The stock of the company is engaged in the business of rendering medical and healthcare services and surpassed its previous high of Rs 775 per share, which it had touched on April 5, 2022.

Analysts believe that hospitals are structurally well-placed and the momentum is expected to continue from a robust Q1FY23.

"The momentum is likely to be driven by sequential in-patient volume and, thus, higher In-patient conversion. One important lever could be incremental elective surgeries, due to continuum of pentup demand, post Covid led complications and higher international patients mix," analysts at ICICI Securities said.

Narayana Hrudayalaya’s revenues are likely to increase around 8 per cent QoQ to Rs 1,117 crore amid continued traction for elective surgeries. EBITDA margins, too, are likely to increase 11 bps to 18.7 per cent while EBITDA is expected to increase 8.7 per cent QoQ to Rs 209 crore. Adjusted PAT, however, is expected to decline 3.7 per cent QoQ to Rs 106 crore.

Meanwhile, in September, Narayana Hrudayalaya 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 Rs 280 crore.

The acquisition will enable Narayana Hrudayalaya to foray into the trauma and orthopaedic specialty within the Narayana Health City campus which housess 2 flagship hospitals namely the cardiac sciences focused Narayana Institute of Cardiac Sciences and the multispecialty unit i.e. Mazumdar Shaw Medical Centre.

Though acquisition looks expensive, analysts believe that it will offer entire spectrum of services in Health City. They foresee limited impact on financials given small deal size, as the said acquisition is in-line with Rs 1,000 crore capex guidance for FY23.

"Narayana Hrudayalaya’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," analysts at Prabhudas Liladher said, with a ‘buy’ rating on the stock, and target price of Rs 810 per share.