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This stock climbs 41% over two months, near-term future is promising, says Kotak Institutional Equities

This stock climbs 41% over two months, near-term future is promising, says Kotak Institutional Equities

This stock climbs 41% over two months, near-term future is promising, says Kotak Institutional Equities
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By Mousumi Paul  Jun 17, 2020 5:23:27 PM IST (Updated)

All sectors related to the healthcare services have remained in focus, and one such company named Narayana Hrudayalaya (NARH) has been outperforming its peers.

Healthcare stocks have risen a fair bit during the lockdown imposed on account of coronavirus. In fact, all sectors related to the healthcare services have remained in focus, and one such company named Narayana Hrudayalaya (NARH) has been outperforming its peers. The company is well-placed to withstand near-term challenges, said Kotak Institutional Equities in its report.

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NARH has its capex cycle and is focused on optimising its existing units, which positions it well enough to endure near-term challenges. Even as we see significant impact on profitability during FY21, we believe leverage level (Rs 5.3 billion net debt) remains comfortable, added the report.
Furthermore, the company has been working on cost-rationalisation initiatives which will help reduce losses in Q1FY21, said the brokerage.
The stock fell as much as 1.41 percent to Rs 279, however, it pared some losses and traded 0.35 percent lower to Rs 281.90 per share on the NSE, at 1:45 pm. Since March lows, the stock has surged 41 percent to current levels.
"Recovery trends are encouraging with gradual improvement in revenues post relaxation of the lockdown and we expect the company to return to EBITDA breakeven level (70 percent of usual revenues) in July," the report added further.
In its recent Q4FY20 earnings, the company reported decline in revenues, but its new units grew by 22 percent YoY. Consolidated operating profit rose 41 percent ahead of the brokerage's estimates on the back of cost-control measures.
Therefore, Kotak Institutional Equities maintained its 'buy' call on the stock with revised target price at Rs 360 (Rs 380 earlier).
During its earnings conference call, the management said, "Most of the hospitals across network have 10-20 percent beds reserved for COVID-19 patients. The company is funding losses for Q1 through cash balance of Rs 1.8 billion on books and does not see increase in gross borrowings in the near term."
Cayman unit is doing much better than Indian operations with revenues already at 65 percent of pre-COVID levels and the unit breaking even on EBITDA in May, added the management.
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