Rs 118/Share Dividend: Healthcare Stock Below Rs 400 Turned Ex-Dividend, Payout Soon; Buy For Rs 515 Target

Aster DM Healthcare, a midcap pharma stock, has turned ex-dividend on April 23 for its massive special dividend payout of Rs 118 per share. This is the highest dividend payout of 2024 so far. Aster DM which is currently below Rs 400 mark, is recommended to buy for a huge target of Rs 515.

On BSE, Aster DM share price ended at Rs 399.40 apiece, up by 0.88% with market cap of Rs 19,950.55 crore.

With a price-to-equity ratio of 100.10x, Aster DM shares 52-week high and low is at Rs 558.30 apiece and Rs 238.90 apiece respectively. In a year, the stock zoomed by over 59%.

The Board of Aster DM Healthcare approved the declaration of a special dividend of Rs 118 per share, slated for payment to shareholders listed in the company's register as of April 23. Accordingly, April 23 was the ex-dividend and record date for the latest dividend.

The dividend is expected to be disbursed within 30 days from the declaration date, a decision accompanied by the Board's choice to forgo an interim dividend for FY24.

The dividend payout comes after the company concluded the separation of its India and GCC businesses, under which Affinity Holdings Limited (a wholly subsidiary of the Company) received a cash consideration of $907.6M.

As the Indian entity is now separate from its GCC counterpart, the Company plans to add 1700 beds by FY27 through the organic route and will further look for expansion through the inorganic route as well.

Aster in the statement said, "Through both greenfield and brownfield opportunities, the company aim to take its total bed tally in India to 6600+ in the next 3 years and scale up its labs and pharmacy business to emerge as the top 3 integrated healthcare providers in India. The plan will encompass a mix of brownfield and greenfield projects, including the upcoming Aster Capital in Trivandrum, and Aster MIMS Kasargod and adding bed capacity to the existing hospitals. The Company will also be looking at potential markets such as Maharashtra and Uttar Pradesh. The capital allocation for this expansion is in the range of 1000cr."

At latest, Prabhudas Lilladher has recommended buy on the stock.

In its note, Prabhudas said, "We believe such steep discount is unwarranted given similar growth profile. We maintain 'BUY' rating with revised TP of Rs515 (earlier Rs. 500) valuing Indian hospital segment at 22x EV/EBITDA on FY26E EBITDA. Timely closure of GCC divestment and utilization of proceeds will be key monitorable in near term.

Prabhudas highlighted three key reasons to buy Aster DM shares. They are:

1. Margins to scale up:

ASTERDM intends to add 500 beds through brownfield expansion in FY25 which will be margin accretive. Also, losses from pharmacy and labs have come off from Rs280m to ~Rs160mn in FY24. This should achieve a break even in FY25 and start contributing from FY26. Overall, the brokerage sees consolidated margins for India business to improve from the current level of 16% to 19.6% in FY26E.

2. Faster ramp-up in Whitefield unit:

The company managed to get good clinical talents which helped them to achieve a faster ramp within 1 year of its operations. The company intends to add another 159 beds (Block D) in FY25 where they will shift the women and child units to Block D and will have continuous land accommodating multi-speciality hospital (Block A+B+C). Overall, Prabhudas sees this facility contributing Rs1bn to total EBITDA by FY27E.

3. India Expansion plan:

ASTERDM plans to add additional 1,750 beds across Kerala and Karnataka regions over the next 3-4 years through a mix of owned, leased and O&M model. Almost 60% of expansion will be coming through brownfield which should be margin accretive. ASTERDM will require +Rs12bn of capex to commercialize addition 1750 beds, which will be largely funded through internal accruals.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.