It has been a fabulous year for Narayana Health. In particular, the diagnostic companies is the other space which has done well but within hospitals, Narayana stood out. It is up 57 percent on a year-to-date basis and it has gained around 28 percent in the past 3 months.
In terms of drivers, the first-half revenue was up around 17 percent odd, profit was up around 166 percent odd, margins have improved drastically to 14 percent versus 8.8 percent.
Now the company is focusing on consolidation. They don’t have any expansion plans planned over the next two years and net debt for them also has declined by around Rs 40 crore to Rs 670 crore in the first half.
Brokerages are positive, so Kotak has a buy with a target price of around Rs 340, Jefferies has a buy and they have a target price of around Rs 340 as well and if compared with peer valuations for Narayana, it is trading at around discount when it comes to EV/EBITDA on FY20 basis.
Healthcare Global Enterprises (HCG) is probably the only other one which is cheaper than Narayana at this point but on an EV/EBITDA according to analysts it is at a cheaper rate as compared to bigger hospitals such as Apollo and Fortis.