At a Glance:
Dr Agarwal’s Eye Hospital is a Chennai-based specialty eye care chain with a 30%+ OPM and 30%+ ROE. Despite being small in size compared to peers like Apollo and Max, it’s quietly scaling with a CAGR of 32% in profits and 18% in sales over 5 years. But—yes, there’s a big but—55% promoter pledging hangs over it like a cataract over a clean lens.

📌 What’s Their Business Model?

• Chain of eye care hospitals—dominant in Tamil Nadu.
• Services: cataract, retina, glaucoma, laser surgeries, squint correction, etc.
• Focused, profitable, specialty-driven healthcare—not a multi-specialty empire like Apollo.

📈 Financial Surgery – Key Numbers (FY25)

🔍 Valuation: Is It Cheap or Just Laser-Sharp?

• P/E: 37.1x – Reasonable for a high-ROE, high-margin hospital.
• P/B: 9.68x – Expensive in book terms. But that’s common in asset-light or high-ROE models.
• Historical CAGR (5Y):
  • Revenue: 18%
  • Profit: 32%
  • Stock Price: 80%
• Fair Value Range:
  • Assuming ₹397 Cr revenue grows at 20% for 3 years, maintaining ~30% OPM → PAT could touch ₹90–₹95 Cr by FY28.
  • At 30x P/E: ₹2,700–₹2,850 Cr market cap = FV range of ₹5,750–₹6,100/share (15–20% upside from current ₹4,318).

⚠️ Red Flags and Concerns

• 🚨 Promoter Pledging: 55.4% of promoter holding is pledged—not ideal for a small cap.
• 🧾 High Valuation vs Peers: Trading at a much higher P/B than Fortis, Krishna Institute, and Narayana.
• 📉 Interest Costs are growing faster than profits (₹13 Cr in FY25 vs ₹7 Cr in FY22).
• ⚒️ Heavy Capex: ₹128 Cr in CWIP → expansion mode, but also pressure on free cash flow.

🔥 What’s Going Well?

• ✅ High ROE/ROCE: 30%+ ROE, 17% ROCE—top class in hospital sector.
• ✅ Expanding Margins: OPM has jumped from 9% (FY14) to 30% (FY25).
• ✅ Cash Flow Positive: ₹94 Cr operating cash in FY25, steady for 3 years.

🏥 Peer Comparison Snapshot

👉 Despite being tiny in size, Dr Agarwal’s margins and ROE outperform even the giants.

💼 Balance Sheet + Cash Flow Check-Up

• Debt rising: ₹333 Cr in FY25 vs ₹193 Cr in FY22
• Capex-heavy mode with CWIP of ₹128 Cr (new centers, maybe?)
• Cash Flow From Operations: ₹94 Cr in FY25 (healthy)
• Net cash flow in FY25 was negative ₹22 Cr → expansion is eating liquidity.

🧮 Ratios & Operating Metrics

• Inventory Days: 117
• Debtor Days: 13 (excellent!)
• Payables Days: 263
• Cash Conversion Cycle: -133 days → efficient billing & vendor cycle
• Dividend Payout: 5% (very low; reinvesting in growth)

🤝 Shareholding Pattern (as of Mar 2025)

• Promoters: 71.9%
• Public: 24.8%
• FII + DII: 3.3% (increasing—FIIs at 1.3%, DIIs at 1.95%)
• 🚨 Pledge alert: 55.4% of promoter stake is pledged.

🧠 EduInvesting Verdict™

Dr Agarwal’s Eye Hospital is what you get when a niche specialist outperforms generalists—30% OPM, 30% ROE, and consistently rising profits. But don’t let the clean financial sheet blind you to the heavy promoter pledging and mounting debt. Think of it as a profitable eye surgeon… who also owes EMI on a Ferrari and two new clinics.

🔍 If you believe in specialty healthcare and can digest some risk, this one’s worth watching.

📉 But the stock’s no longer “undiscovered”—with a P/E of 37 and P/B of 9.7, it’s priced like perfection.

Fair Value Range (EduEstimate™): ₹5,750 – ₹6,100
(based on 20% profit CAGR, 30x forward earnings multiple)

✍️ Written by Prashant | 📅 28 June 2025
Tags: Dr Agarwal’s Eye Hospital, hospital stocks, healthcare stocks India, pledged shares, high ROE, specialty healthcare,