AFYA Welcomes 300 Operational Medical School Seats in Salvador

Afya Limited AFYA completed the acquisition of the total share capital of Unidom Participacoes S.A. (Unidompedro and Faculdade Dom Luiz) through its wholly-owned subsidiary Afya Participacoes S.A.

This strategic buyout will provide Afya with 300 operational medical school seats in Brazil's Salvador city. The average purchase price of this strategic transaction was R$ 660.0 million, of which R$ 347.8 million is already paid (net debt deduction) and the remaining R$ 312.2 million will be paid in about 10 annual installments of R$31.2 million each.
The authorization request for the 300 seats was made to the Ministry of Education ("MEC") before the Mais Medicos Law was enacted and MEC concluded its analysis and issued Ordinance 630/2020. Currently, among the 300 authorized seats of Unidompedro, 125 seats are final and the remaining 175 seats are subject to a conclusion of the Ordinance 630/2020 review by the MEC upon judicial order in 2021.
If Unidompedro wins the bid processes in the Mais Medicos 3 Program, an additional payment of R$250 thousand per granted seat will be made.
Afya expects an EV/EBITDA of 4.2x upon the maturity of this transaction and beyond. In 2027, at the medical school's full maturity, expected net revenues will be R$ 267 million, of which more than 95% will be contributed by Medicine.

Price Performance

Shares of this medical education group and medical practice solutions provider in Brazil gained 21.4% in the past year compared with the Zacks Schools industry's 46.4% growth. Although the company underperformed the industry, its focus on accretive buyouts, operational restructuring efforts and other initiatives offering top-tier medical education services will likely boost its growth in the upcoming period.

Considering the estimate revision trend, the Zacks Consensus Estimate for 2024 and second-quarter earnings per share of AFYA have, respectively, been revised upward to $1.63 from $1.56, and to 37 cents from 35 cents, in the past 30 days. The estimated figures indicate 27.3% and 27.6% year-over-year growth, respectively.

The growth trend is solidified by a VGM Score of A, backed by a Value Score and a Growth Score of A. Such an uptrend depicts analysts' optimism about the stock's potential.

Zacks Rank & Other Key Picks

Afya currently carries a Zacks Rank #2 (Buy).

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