Metropolis Healthcare Ltd. share price target

Strong performance led by core business; Maintain BUY

Metropolis Healthcare (METROHL) reported yet another strong quarter on continued elevated margins and healthy growth in number of patients.

Metropolis Healthcare (METROHL) has acquired Dr. Ganesan's Hitech Diagnostic Centre (100% stake) for a consideration of INR618cr (combination of cash and stock deal).

Metropolis Healthcare (METROHL) reported strong Q2FY21 results (Revenue/EBITDA/PAT beats estimate by 3%/12%/11.5%).

EBITDA loss was reported for April (CY20) We believe METROHL and other organized players that offers tests at premium pricing to be at risk after the lifting of lockdown due to 1) low footfalls triggering revenue loss 2) high operating cost (for COVID compliance) leading to decline in EBITDA/EBITDA margin 3) expected change in spending pattern of consumers (due to challenging demand scenarios) and 4) competitive pricing pressures to maintain market share. These factors may lead to customer preference towards low-cost local and unorganized players....

plenty of room for growth of organized players since 80% of the market is catered by un-organized players. Favorable government incentives like tax breaks towards preventive testing could further add to volume growth. Besides, organized players could easily pass on price hikes of ~0.5% p.a to cover medical cost inflation...

Expansion plan to be led by mix of organic and acquisition route We met the management team of Metropolis Healthcare (METROHL) at their Global Reference(Mumbai) to understand their business outlook for next few fiscals. We believe METROHL will continue to focus on specialized test (low volume and high complexity), and increase its share in B2C business by partnering with local labs (with sizeable track record) and converting them into Metropolis-branded PSCs (Patient Service Centre). Its wide range of test menu and patient shift towards organized diagnostic player are some...

Metropolis Healthcare Ltd (MHL) is one of the leading diagnostics companies having prominence in West and South India. The company offers a comprehensive range of clinical laboratory tests & profiles, and support services to clinical research organizations. MHL operates through laboratory and service network and has implemented a hub and spoke' model for quick and efficient delivery of services. Revenue, EBITDA and PAT grew at a CAGR of 12%, 13% and 22% respectively during FY15-FY18 while the company has maintained an average RoE...

IPO NOTE

Well positioned to leverage expected growth in diagnostics industry As per Frost & Sullivan analysis, the diagnostics industry is projected to grow 1.3x to | 802.1 crore by FY20P from | 596.1 crore in FY18E. Metropolis is the third largest diagnostics service provider in India with a widespread presence across 19 states. Also, the company is well poised to leverage on the shifting trend from unorganised providers to organised providers in the diagnostics market. The overall growth in the Indian diagnostics market is expected to be led by eight major cities. The company has a significant...