Target: ₹518
CMP: ₹432.45
Having three generations of the promoter family involved in providing comprehensive eye care services, Dr Agarwals Health Care (DAHL) has established itself as one of the largest eye care franchises with 221 facilities as of Dec 24. The range of services offered by DAHL includes surgeries (65 per cent of revenue), consultation (14 per cent), and products such as opticals (13 per cent) and pharmaceuticals (8 per cent).
The increasing demand for eye care services (expected industry CAGR of 12-14 per cent over FY24-28) along with DAHL’s initiatives to expand its patient base at existing centers and open new centers are likely to drive industry growth over the next five years.
DAHL has shown impressive revenue and EBITDA growth with a CAGR of 38 per cent and 41 per cent respectively over FY22-24, supported by both organic and inorganic growth strategies. Projected revenue and EBITDA CAGR of 21 per cent and 23 per cent, reaching ₹2,490 crore and ₹690 crore respectively over FY25-27, are expected to be driven by a 19 per cent CAGR in surgical volumes, a 20 per cent CAGR in pharmacy revenues, and stable operating profitability.
Our valuation of DAHL is based on a Sum of the Parts (SoTP) approach, with a TP of ₹510 determined by applying multiples such as 24x 12M forward EV/EBITDA for the surgery/consultancy businesses, 14x EV/EBITDA for the optical business, and 12x EV/EBITDA for the pharmacy business, adjusting for non-promoter stake in Dr Agarwals Eye Hospital (AEHL) and Dr Thind. We initiate coverage on DAHL with a Buy rating.
Published on March 20, 2025.
