Target: ₹665
CMP: ₹483.35
On November 29, Aster DM Healthcare announced its intention to merge with Quality Care India Ltd (QCIL), a hospital platform backed by private equity firm Blackstone. Under the platform, QCIL has two hospital brands viz. Healthcare hospitals and KIMS Health in India. Note that Blackstone will have a majority stake in QCIL in 2023.
Aster DM Healthcare has announced its intention to merge with QCIL. The merged entity will operate under the brand name Aster DM Quality Care Ltd and have a bed capacity of approximately 10,150 beds. The locations of existing hospitals are well diversified.
Aster DM values QCIL at 25.2x FY24 EV/EBITDA, which we believe is reasonable compared to the average valuation of listed hospitals at 35x and recent industry deals. Moreover, we expect valuations for the sector to remain high as foreign direct investment inflows into hospitals are at record levels and private equity investors are looking to acquire ownership of Indian hospitals.
The proposed merger could be the largest hospital chains in India, with a bed capacity of over 13,250 versus APHS 12,700+ in FY27. We believe that the proposed merger should receive a higher valuation than other small/medium listed hospitals and should see opportunities for revaluation.
Our sensitivity analysis of the proposed merged entity suggests a TP range of ₹631-837. We are waiting for more details and regulatory approval before revising our figures.
