Shalby Ltd. share price target

All set for growth

Therapy-wise breakup Q3FY22: anthroplasty:38%, critical care & general medicine: 11%, orthopaedic: 9%, oncology:10%, cardiac science:10%, neurology 6%, nephrology:3%, others:13% Shalby registered a blended ARPOB of | 32,049 and ALOS of 4.02 days (without day care procedures) in Q3FY22 Acquisition of US based Consensus to diversify into related implant...

Shalby Ltd (Shalby') came out with its Q2FY22 results which reported sequential margin degrowth on the back of implants businesses losses and reduced covid related tailwinds (16.2% vs 25.5% for Q2FY21 vs 20% for Q1FY22). Implant business reported USD 1mn revenue in Q2FY22, guidance for FY22E and FY23E at INR 50crs and INR 100crs respectively. First Ortho Franchise started in Udaipur, expected to open 50 franchises across India over medium term. The newer hospitals (892 beds) reported ~12% EBITDA margins with 37% revenue contribution while mature hospitals (228 beds) reported ~37% EBITDA margins with 29% revenue contribution. Ramp-up of occupancy in newer hospitals will improve the overall EBITDA margin profile. Key optionalities including the Implants business and the franchisee business are yet to play out. We retain a BUY on Shalby with a target price of Rs280, which is 81% upside on CMP. At...

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Shalby Ltd (Shalby') leader in Arthroplasty in India (market share of 15%), remains an under researched and under owned Investment Idea. Its best in class EBITDA margins even with lower occupancy and lower Capex/bed is a testimony of its cost and capital efficient operations. It remains almost net debt free even with the recent increase in its bed capacity by more than 55% and an implant facility acquisition. The newer hospitals (33% of operating beds) to lead EBITDA expansion on account of increased occupancies and asset maturity. Recent Implant facility acquisition provides massive synergies to Shalby with estimated annual savings of INR >11cr. Strong management bench-strength can help turnaround the International Implant business. We thus Initiate Coverage on Shalby with a BUY rating and a target price of INR 320, 29x P/E FY23 earnings, which is an upside of 65% on CMP....

Rapid ageing, greater life expectancy, lack of exercise and altered lifestyles are driving incidences of osteoarthritis among Indians. Knee replacement surgery in India has been growing in double digits over the years. It is expected to emerge as fourth most common cause of physical disability in India in the next decade. Shalby is a market leader in procedure of arthroplasty (source: F&S; Report). It has ~15% market share of all joint replacement surgeries conducted by organised private corporate hospitals in India. It has performed more than one lakh joint replacements till date....

The company has a strong brand equity mainly in Gujarat. Shalby has witnessed significant growth in volumes across its hospital network. Arthroplasty continues to dominate its revenue pie although it has been witnessing greater traction in other specialities as well. Leverage free balance sheet, strong margins and continuous generation of free cash flows also provide additional cushion in a capex heavy industry. However, margins are still skewed towered the top two hospitals. We initiate Shalby with HOLD recommendation mainly due to high concentration risk. We value...

60 Equity Shares and in multiples thereof. Public issue of 20,354,839 Equity shares of Face value Rs. RII 10 each, (Comprising of fresh issue of 19,354,839 Equity Total Public...

Outlook and valuation: At the upper end of the price band (`245-`248), the issue is priced at 42.8x of its FY2017 earnings vs. Apollo hospitals (73.7x) and Healthcare Global (121.2x). On EV per bed, it is available on 3.8x vs Apollo (2.3x) and Healthcare Global at 2.1x. We like its growth story, better returns profile than peers and stron..