We expect revenue for Innscor to grow 16% y/y to US$811mn from a combination of affordable pricing policies in place to support volumes and sustained focus on diversification and expanding product portfolios. Our view is that Group EBITDA for FY23 will register at US$115.85mn, assuming an EBITDA margin of 14.3%. Historical EBITDA margin for the Group in a dollarized economy has been c. 11% but Innscor Africa has since adopted a leaner, cost efficient structure by regrouping operations according to their core business and spinning off specialised segments into standalone entities. We forecast net margin in the period to soften to a steady state of 7% as other once off income lines fall away.
We estimate that Innscor trades on a P/E (+1) multiple of 6.10x, compared to its peers at an average of 15.13x and EV/EBITDA (+1) of 3.29x, compared to peers at an average of 8.62x. Using a combination of multiples and a DCF valuation approach we have arrived at a target price of US$1.34 for Innscor, implying upside of 106% at current levels. We therefore maintain our BUY recommendation.
