look news india
Minor fluctuations have been seen recently in the shares of Aster DM Quality Care, one of the leading companies in the healthcare sector in the Indian stock market. The stock was seen trading around ₹748.45 during the trading session. However, despite slight short-term decline, the country’s leading brokerage firm ‘Motilal Oswal’ has started its coverage on this stock by adopting a very positive stance. The brokerage has given a ‘Buy’ rating on this stock and has set a base case target price of ₹ 910 for investors.
Compared with the current market price, this shows the potential for a huge rise of about 20 percent in the target stock. The brokerage firm believes that after the recent merger and business restructuring of the company, its fundamentals have become quite strong, due to which investors are expected to get excellent returns in the coming months.
According to the research report of Motilal Oswal, after the strategic merger between Aster DM Healthcare and Quality Care India Limited (QCIL), ‘Aster DM Quality Care’ has become one of the largest and most powerful hospital networks in the country. After this mega merger, the company collectively has a total of 39 state-of-the-art hospitals in 28 major cities of the country and a huge capacity of about 10,600 operational beds.
The brokerage estimates that by aggressively expanding its capacity, the company can increase its number of operational beds to more than 15,000 by FY 2030. To accelerate this expansion, the company is using a balanced mix of brownfield projects, greenfield expansion and asset-light model, thereby also ensuring efficient management of capital.
Motilal Oswal has predicted a huge jump of about 46 percent in the share price from the current level in its ‘Bull Case’ scenario for this stock. This positive outlook is underpinned by several strong business triggers:
-
Successful and speedy integration of the operations of both the companies after the merger.
-
Immediate benefit of cost savings (Synergy Benefits) arising from acquisitions and operational activities.
-
Continuous improvement in bed occupancy rate (bed filling rate) in hospitals.
-
Increase in average revenue per occupied bed (ARPOB).
-
Rapid growth in revenues from medical value travel and highly specialized super-specialty medical services.
Like every investment, this stock also has some risk and downside aspects associated with it. According to the brokerage’s ‘Bear Case’ scenario, if trailing 12 months EBITDA is around ₹2,490 crore and valuations get a lower multiple of 25x EV/EBITDA, the target for the stock could come down to ₹700, indicating a downside of about 8% from the current price. Delay in the merger process, slow pace of new capacity expansion and post-merger cost pressure could be the main reasons behind this slowdown.
Additionally, regulatory changes, government controls on healthcare prices, and any disruption in expansion may impact the company’s profitability. Out of a total of 15 analysts covering Aster DM Quality, 13 have advised ‘Buy’, 1 have advised ‘Hold’ and 1 have advised ‘Sell’. So far in the current year, this stock has given returns of about 23% to investors. Be sure to consult your financial advisor before making any major investments.