In this ever-changing stock market, investors are always looking for opportunities. Recently two big brokerage houses Morgan Stanley and Motilal Oswal have put a spotlight on a recently listed healthcare IPO and are predicting a huge upside. Their coverage has triggered the interest of investors and the company’s trajectory suggests it may be one of the top performers in the healthcare space. The company is Dr Agarwal’s Health Care. Let’s explore what brokerages are projecting.
Morgan Stanley Sees Huge Upside
Morgan Stanley started coverage of Dr Agarwal’s Health Care with an “Overweight” rating and target price of INR 502. This means a 20% upside from the current market price. Morgan Stanley highlighted the huge potential of India’s eyecare industry with a high total addressable market, high barriers to entry and asset-light business.
According to Morgan Stanley, Dr Agarwal’s Health Care’s leadership is reflected in its doctor-promoter background and revenue which is 1.7 times of its nearest competitor. They are expecting a 19% CAGR in revenue and EBITDA between FY25-FY27 with growth coming from the planned addition of 45 new centres every year.
Motilal Oswal Joins the Bandwagon
Adding to the momentum Motilal Oswal also started coverage with a ‘Buy’ rating and target price of INR 510. This means a 22% upside from the current price. The report highlights Dr Agarwal’s Health Care’s aggressive expansion strategy of both organic and inorganic growth. As of Dec 2024, Dr Agarwal’s Health Care operates 221 centres and is adding 40-50 centres every year.
Motilal Oswal is expecting huge growth across all business verticals with 21% CAGR in revenue, 23% CAGR in EBITDA and 31% CAGR in PAT between FY25-FY27. This growth will come from increasing surgical volumes, growth in pharmacy revenues and sustained profitability.
Dr Agarwal’s Health Care – Overview
Dr Agarwal’s Health Care Limited is India’s largest and most comprehensive eyecare services chain which is getting brokerage attention because of its size and excellence. With 221 centres operational and presence in 14 states, 4 union territories and 9 African countries Dr Agarwal’s Health Care has consolidated its market leadership through its unique hub and spoke model. The company has diversified revenue streams with surgeries contributing 65%, consultations 14%, optical products 13% and pharmaceuticals 8%.
Dr Agrawal Health – Business Model
Dr Agarwal’s Health Care operates on a scalable model. The hub-and-spoke structure allows the company to treat a larger patient base while optimising capex. Currently, Dr Agarwal’s Health Care has 28 hubs and 193 spokes, comprising primary and secondary facilities for different stages of diagnosis and treatment.
This asset-light model not only reduces capex but also enables faster geographical expansion. Dr Agarwal’s Health Care has delivered 38% revenue CAGR and 41% EBITDA CAGR over FY22-24 through a mix of organic and inorganic growth.
Financials and Valuations
Motilal Oswal is valuing Dr Agarwal’s Health Care on a sum-of-the-parts basis, 24x EV/EBITDA for surgery and consultancy businesses, 14x for the optical segment and 12x for the pharmacy business. After adjusting for a minority stake in associate entities, the target price is INR 510.
Morgan Stanley report adds to the positivity and expects 44% net income growth over the next 3 years with stable operating margins, debt reduction and improved efficiencies.
Dr Agrawal Post-IPO Performance
Dr. Agarwal’s Health launched its IPO on 29 January 2025, the INR 2,7,27 crore issue was subscribed 1.55X and listed with a minute loss of 0.50%. Post-IPO performance is a roller coaster ride, IPO reached its all-time high of INR 449 on 13 Feb 2025, reflecting a return of 11%. Currently, it is trading at INR 444.90 per share.
Key Drivers of Growth
- Consistent growth driven by urban and semi-urban demand
- Asset light business model
- The eyecare industry growing at 12-14% CAGR over FY24-28
- Expansion beyond India, becoming a global player in eyecare
- Strong management with 3 generations of medical expertise
- Shift from unorganised to organised players
Conclusion
With two of the largest brokerages providing bullish reports and projecting over 20% upside, Dr Agarwal’s Health Care emerges as a compelling investment story in India’s healthcare landscape. Its rapid expansion plans, stable financial metrics, diversified revenue streams, and market leadership position make it a stock to watch for long-term investors.
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Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult with your financial advisor and conduct your own due diligence before making any investment decisions.