High-Efficiency Healthcare Model And Demographic Trends Will Shape Future Landscape

Key Takeaways

• Operational challenges in Mexico are being addressed, while strong performance in Peru showcases the potential of Auna's value-based, integrated care model.
  
• Investments in specialty services and payer diversification are expected to drive long-term revenue growth, higher margins, and stable, predictable cash flows.
  
• Operational disruptions in key markets, financial strain from debt and regulatory risks, and rising competition threaten Auna's revenue growth, margins, and long-term market position.

Catalysts

A healthcare service provider, operates hospitals and clinics in Mexico, Peru, and Colombia.

• Volume declines and margin compression in Mexico stem from transitional operational disruptions as Auna implements its high-efficiency model, but management expects a rebound as corrective measures take hold and volumes recover, which should boost future revenue and EBITDA.
  
• Peru's strong performance demonstrates the earnings power of Auna's vertically integrated, value-based model, especially as capacity utilization rises and high-complexity, higher-margin services increase, supporting future margin and revenue expansion.
  
• The aging population and rising prevalence of chronic diseases across Latin America are expected to drive sustained demand for healthcare, increasing patient volumes and utilization, which should be a tailwind for Auna's long-term revenue growth.
  
• Ongoing investment in specialty services and expansion of national oncology networks in Mexico opens new high-value service lines (e.g., OncoSalud and Opción Oncología), likely to increase average revenue per patient and improve net margins as network effects scale.
  
• Improved payer diversification and risk-sharing strategies in Colombia are stabilizing cash flows and enabling recurring, predictable revenue streams, with potential for revenue and margin uplift as Auna further integrates payer-provider models and value-based care contracts.

Auna Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Auna's revenue will grow by 7.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.7% today to 7.5% in 3 years time.
• Analysts expect earnings to reach PEN 405.0 million (and earnings per share of PEN 4.92) by about July 2028, up from PEN 159.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as PEN302.1 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.2x on those 2028 earnings, down from 10.5x today. This future PE is lower than the current PE for the US Healthcare industry at 21.0x.
• Analysts expect the number of shares outstanding to grow by 0.29% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.24%, as per the Simply Wall St company report.

Auna Future Earnings Per Share Growth

Risks

• Ongoing challenges with implementing the AunaWay model in Mexico, particularly resistance from physicians due to disruption of traditional supplier relationships, have led to volume declines and operational setbacks; if this transition remains prolonged or faces further setbacks, it could depress revenue growth and compress net margins in the medium term.
  
• Persistent payment risks and regulatory interventions in Colombia's healthcare sector continue to require increased provisions and impairments in accounts receivable, resulting in ongoing hits to net income and possible cash flow challenges if collections do not improve as anticipated.
  
• Heavy reliance on vertical integration and expansion-often via upfront payments and acquisitions-raises Auna's debt burden, and with unchanged leverage levels, further capital needs or higher interest rate environments could erode net margins and reduce earnings flexibility.
  
• Macroeconomic softness in key markets like Mexico, including uncertainty around tariffs, employment, and consumer spending, along with FX volatility, could weaken demand for private healthcare services and negatively impact revenue and profitability.
  
• The increasing complexity and cost of treating chronic diseases, coupled with industry shifts toward digital health platforms and rising competition from new entrants, may challenge Auna's ability to adapt efficiently, risking market share loss and further margin compression over the long term.

Valuation

• The analysts have a consensus price target of PEN12.367 for Auna based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of PEN19.0, and the most bearish reporting a price target of just PEN7.2.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be PEN5.4 billion, earnings will come to PEN405.0 million, and it would be trading on a PE ratio of 10.2x, assuming you use a discount rate of 8.2%.
• Given the current share price of PEN6.37, the analyst price target of PEN12.37 is 48.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.