Buy Metropolis Healthcare, target price Rs 1,466: ICICI Securities

ICICI Securities has upgraded Metropolis Healthcare to “buy” from “hold” with a target price of Rs 1,466. According to the brokerage, the company witnessed healthy growth in volume and realisation until last week but has witnessed some impact since the last 2-3 days due to the lock-down across the country. Metropolis has received approval from ICMR to conduct Covid-19 tests (with a price cap of Rs 4,500/test). While volumes have dwindled, there is no structural impact in the business and volumes would rebound quickly post normalisation.

The share price moved up by 6.31% from its previous close of Rs 1316.80. The last traded price is Rs 1399.90.

Investment Rationale


The brokerage cut revenue/PAT estimates by 2-3/3-5% to factor in near term impact on volumes. Metropolis is expected to register revenue, EBITDA and PAT CAGRs of 12.2%, 13.5% and 13.9%, respectively, over FY20-FY22E. RoE and RoCE would remain strong at 35.1% and 31.3%, respectively, in FY22E whereas RoIC would move to 51.5%.

The brokerage is positive on the long-term outlook considering the company’s strong brand franchise with sustainable growth, expansion potential, healthy FCFF generation and strong return ratios.

The recent correction in stock price has made the valuations reasonable. The brokerage has upgraded the rating from “hold” to “buy” with a revised discounted cash flow (DCF)-based target price of Rs1,466/share (earlier: Rs1,605/share).

Key risks: Higher-than-expected competition and continued COVID-19 crisis.