scorecardresearchHDFC Securities retains ‘buy’ rating on Indraprastha Medical Corporation,

HDFC Securities retains ‘buy’ rating on Indraprastha Medical Corporation, sees 15% upside – key reasons

Updated: 19 Apr 2023, 04:11 PM IST
TL;DR.

  • Considering the bull case fair value price of 99.5, it indicates a 15.4% growth in the value of the stock from the current market price of 86.2 (as on April 19).

HDFC Securities: Investors may buy IMCL between  <span class='webrupee'>₹</span>82 and  <span class='webrupee'>₹</span>84 and add on dips between  <span class='webrupee'>₹</span>72 and  <span class='webrupee'>₹</span>74, according to the brokerage.

HDFC Securities: Investors may buy IMCL between 82 and 84 and add on dips between 72 and 74, according to the brokerage.

Domestic brokerage house HDFC Securities Ltd has a 'buy' recommendation on Indraprastha Medical Corporation Ltd (IMCL), with a base case fair value of 93 and the bull case fair value of the stock of 99.5 over the next 2-3 quarters.

Considering the bull case fair value price of 99.5, it indicates a 15.4% growth in the value of the stock from the current market price of 86.2 (as on April 19).

Investors may buy the stock between 82 and 84 and add on dips between 72 and 74, according to the brokerage.

A 764-bed super specialty tertiary care hospital with 52 specialist departments, IMCL is a joint venture (JV) between Apollo Hospitals Enterprise Ltd (which owns 22% of the company) and the state government of Delhi (which owns 26% of the company).

Among the hospital's important specialty departments are orthopedic, cardiology, oncology, and neurology, all of which have promising futures in terms of revenue, believes the brokerage.

Let's look at the top four reasons cited by the brokerage firm for investing in the stock:

Fundamentally strong

The brokerage firm believes that IMCL is a fundamentally strong prospect in the Indian healthcare sector, one that has tremendous development potential, is well-established in Delhi and the NCT, has a great brand reputation, sound financials, an asset-light business strategy, and requires a lower capital expenditure.

Government initiatives and overall advancement

The brokerage claims that a number of reasons favour the Indian healthcare industry, which have influenced its favourable stance on it. These include recent government programmes like Ayushman Bharat, the National Digital Mission, and others, rising income levels, an ageing population, increased awareness of personal cleanliness and health, expanding health insurance penetration, and technology improvements.

Quality medical care

The company has an excellent track record, has been there for a while, and provides high-quality medical care supported by relationships with its doctors and other medical professionals that have lasted through time. It significantly increases the value of the 'Apollo' brand in both real and intangible ways.

Overall growth in Indian healthcare industry

Furthermore, by taking advantage of the multibillion-dollar medical value travel opportunity, the Indian healthcare sector has expanded rapidly. India has become one of the most popular locations for patients seeking medical care around the world.

"However, geographic concentration, government regulations and ongoing litigations regarding free treatment to poor patients continue to remain key concerns for the long term investment in the company," advised the brokerage.

Valuations

Lockdowns during the pandemic had a significant negative impact on the healthcare businesses in India. Whether it was in single-specialty, multi-specialty, tertiary-care institutions, or even diagnostics firms, patient footfall had significantly decreased.

"Financial performance of IMCL was also impacted due to the same, however, as the situation has stabilised, the company’s business has also got back on track. There was about 45% jump in revenue in FY22 and margins again also improved to around 13% in FY22 versus 6.6% in FY21. The company has negligible debt on balance sheet and has been paying healthy dividends to its shareholders. We have envisaged 18% compound annual growth rate (CAGR) in revenue and 32% CAGR in net profit over FY22-25E," added the brokerage.

 

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First Published: 19 Apr 2023, 04:11 PM IST