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Aster DM: Mixed Q2 with surge in revenues but margins below estimates

News: Aster DM’s revenues grew 5.6% QoQ to Rs.2504.3 crore driven by 10.7% QoQ growth in the India business to Rs.609 crore and 4.7% QoQ growth in GCC countries to Rs.1990 crore. EBITDA margins improved 185 bps QoQ to 13.7% while EBITDA grew 22.1% QoQ to Rs.342.8 crore. Subsequently, net profit increased by 140.4% QoQ to Rs. 106.9 crore. Delta vis-à-vis EBITDA was mainly due to higher other income and lower interest and tax expenditure.

Views: The company posted a mixed set of numbers with revenues being above I-direct estimates but margins were a miss. With GCC and India operations being mostly normalized Aster’s better performance is reflected through significant improvement in both out-patient and in-patient numbers at the hospitals and higher footfalls across the pharmacies and clinics. Aster owns a unique business model among Indian healthcare services providers with strong established presence in GCC and India. We are positive on Aster’s integrated business model and expect gradual margins and RoCE improvement on the back of higher occupancy and capacity optimisation in new assets from FY22E onwards.