Brokerage firm IIFL Securities has a buy call on Metropolis Healthcare stock with a target price of ₹1850, implying a 27% upside from the stock's September 23 closing of ₹1,460.45.
Year to date (YTD), the stock is down 57% against a flat Sensex.
As per the brokerage firm, it recently hosted Metropolis (Ameera Shah, MD and Rakesh Agarwal, CFO) for NDR in Singapore, where management highlighted that most of the new competitors in the industry have found it challenging to scale up their B2C business (business-to-consumer), given limited support from doctors.
"While aggressive pricing by new players helps attract customers, retention will become a challenge considering profitability pressures and patient’s preference for brand trust/quality over pricing in the specialised/semi-specialised segment," the brokerage firm said.
"Although Metropolis so far catered to only about 6% of the population which at any point of time was falling sick and required a diagnostic test, company’s organic network expansion plans will enable servicing wellness needs for the remaining population and will help Metropolis to revert to a mid-teens growth trajectory," the brokerage firm added.
IIFL highlighted that Metropolis’ revenue contribution from wellness tests increased from nearly 9% in FY22 to about 12% in Q1FY23. The management is targeting to augment this to about 20% over the next few years. While Metropolis has historically been focused on the acute and premium wellness segment, the company is now making investments to tap into the affordable wellness and chronic testing market as well.
Volume mix for acute:chronic is 80:20 for Metropolis currently, though the value share of the chronic business will be lower given that realisations are higher in the acute segment.
With increasing contributions from wellness tests, the share of the chronic business will also improve. Acquisition of customers through the affordable wellness segment may allow Metropolis to cross-sell its other services to these patients. Further, the loyalty program for chronic patients is likely to be launched over the next few months, IIFL said.
"Ebitda margins are also expected to improve to pre-Covid levels of about 26.5% (200bps QoQ expansion) from Q2FY23. With 12-month forward valuations at about 38 times PER being nearly 15% below pre-Covid levels, we maintain a buy rating," said IIFL Securities.
According to a MintGenie poll, an average of 14 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of the broking firm. These do not represent the views of MintGenie.