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Target: ₹2,052
CMP: ₹1,614.50
Metropolis Healthcare’s Q2-FY23 performance was marginally lower than our expectation due to its slower non-Covid revenue growth, with its revenue/EBITDA missing our estimates by 4.2/2.5 per cent. Overall revenue fell 0.8 per cent y-o-y due to a high Covid base. EBITDA margin dropped 350 bps y-o-y, but increased 180 bps q-o-q to 26.3 per cent, beating our estimate of 25.8 per cent. Non-Covid organic revenue grew 6.5 per cent y-o-y, but excluding government contracts, it grew 12.5 per cent. In the quarters ahead, we expect non-Covid q-o-q revenue growth to improve with EBITDA margins of 26-27 per cent.
The company plans to add over 120 new collection centres in Mumbai by end-FY23.
Factoring in Q2-FY23’s slower core business growth, we trim our FY23-25E earnings by 3-5 per cent. We retain BUY given we think METROHL’s revenue growth has the potential to rebound to double digits from FY24 onward and its attractive valuation of 37x FY24E P/E vs 47x mean NTM P/E since listing. Our new TP of ₹2,052 (₹2,134 earlier) implies 42x (unchanged) September-24E EPS.
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