Valuation and Recommendation
Aster DM Ltd has shown consistent sales growth of 38% during FY12-17 with EBITDA growth of 16% as the company doubled its number of clinics in past two years. This has resulted in increas ed expenditure base. Further due to one-time write-off take in Saudi Arabia, the company reported loss at PAT level in FY17. However, we believe these are one-time incidents. We expect Aster DM to be back to double digit EBITDA margins soon. With the IPO money, the company intends to repay Rs 564 cr of debt, which would bring down the interest out go; aiding the bottom-line. We believe the valuations are fair considering the huge potential in the industry.
Going forward, as the company is coming out of its investment phase, we expect Aster to report higher growth in profitability and improvement in margins as well as return ratios. At higher band the issue is offered at 19.6x FY18E calculated EV/EBITDA. We like the company’s strong brand equity and consistent track record. We recommend investors to subscribe the issue for long term gains.
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About Nirmal Bang
Founded in 1986 by Nirmal Bang, the Nirmal Bang is recognized as one of the largest retail broking houses in India, providing an array of financial products and services. Their retail and institutional clients have access to products such as equities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance, depository services and PMS. The Group is headed by Mr. Dilip Bang and Mr. Kishore Bang.
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