Narayana Hrudayalaya extends gains, surges to a new 52-week high

Shares of Narayana Hrudayalaya surged nearly 4 percent in early trade on June 1 to scale a fresh 52-week high of Rs 927.95, buoyed by the company’s strong growth prospects.

At 10.54 am, shares of the hospital company were trading at Rs 922.45, up 3.25 percent on the National Stock Exchange, as the stock extended its uptrend to the fourth straight session.

Sentiment for the stock has been running high since the hospital major released its robust earnings for the fourth quarter on May 19. The stock has since gained 19 percent.

The strong quarter gone by coupled with expectations of robust growth have triggered an upmove in the stock price. In the March quarter, the company fired on all cylinders as net profit, revenue and profitability moved higher.

During the January-March period, the company’s net profit surged threefold on-year to Rs 173.2 crore on a topline of Rs 1,221.60 crore, up 30 percent. The revenue in the fourth quarter was also the highest ever.

The EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin also expanded to 23.8 percent for the quarter, compared to 19.7 percent in the year-ago period.

The company’s strong quarterly show also evoked positive sentiment among brokerages, which anticipate strong growth for the hospital major.

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Brokerage views

SMIFS Institutional Research expects Narayana‘s Cayman Island as well as India operations to continue to do well. “Narayana is exploring
opportunities in other therapies as well such as oncology and gastro, which would improve the specialty mix,” the firm wrote in its report. Moreover, SMIFS also expects patients and case mixes to improve, which will result in increased EBITDA.

Geojit Financial Services also had similar expectations from Narayana, as it believes growth will continue on the back of an increased patient
footfall, rising Average Revenue Per Operating Bed (ARPOB) and the
aggressive capex plan for both organic and inorganic expansion.

Prabhudas Lilladher finds the valuation attractive. With expectations of sustained growth momentum, the firm has assigned a “buy” call on the stock, with a price target of Rs 980.

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