Leandro Bastos, an analyst from Citi, has initiated a new Buy rating on Auna S.A. Class A (AUNA).
Leandro Bastos has given his Buy rating due to a combination of factors that suggest Auna S.A. Class A is poised for substantial growth and currently undervalued in the market. The company is strategically situated to capitalize on the increasing demand for private healthcare in Spanish-speaking Latin America, bolstered by demographics such as a growing elderly population and low private healthcare penetration. Furthermore, Auna’s recent expansion into Mexico has not only enlarged its total addressable market but also aligned the company with the advantageous nearshoring trend, which is expected to enhance its margins and return on invested capital (ROIC). Despite the stock trading at a significant discount following its IPO, Bastos views the current valuation, with projected price-to-earnings ratios for 2024 and 2025, as not fully appreciating Auna’s robust growth prospects and its unique market position.
Additionally, Bastos is optimistic about Auna’s future revenue growth, expecting a compound annual growth rate (CAGR) of over 12% from 2023 to 2025. He acknowledges the company’s efforts in improving hospital occupancy rates, operational streamlining, and efficiency enhancements that are anticipated to drive profitability—including a notable improvement in adjusted EBITDA margins. Moreover, Bastos has confidence in the company’s capability to generate significant earnings growth, cash flow, and returns in the foreseeable future. The valuation employs a discounted free cash flow model that leads to an attractive target price, despite acknowledging the risks associated with business complexity, higher-than-optimal leverage, execution risk, and potential regulatory changes. Overall, the expected share price return of 86.4% presents a compelling case for a Buy rating.
In another report released today, J.P. Morgan also initiated coverage with a Buy rating on the stock with a $16.00 price target.
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Auna S.A. Class A (AUNA) Company Description:
Auna is a Latin American healthcare company with operations in Mexico, Peru and Colombia, prioritizing prevention and concentrating on high complexity diseases that contribute the most to healthcare expenditures. Our mission is to transform healthcare by providing access to a highly integrated healthcare offering in the underpenetrated markets of Spanish Speaking Americas.
