KIMS’ Ebitda (pre Ind-AS) grew 18% YoY in Q1, 2% ahead of analysts of IIFL Securities estimates, driven by a robust 15% YoY revenue growth in KIMS’ Telangana/AP hospitals (ex-Sunshine, Nagpur). Despite its dominance in core markets, mgmt still sees opportunities to drive further growth in Telangana/AP cluster by adding Oncology/Mother & Childcare speciality across its hospitals and by adding 1,500 beds in these markets over the next 3-4 years. Additionally, KIMS’ expansion plans to add 1,350 beds in Bangalore, Nashik and Thane by H1FY25 will also help diversify presence across new markets. Scale-up in profitability of Sunshine, Nagpur and existing AP hospitals would enable KIMS to absorb the margin-drag from new hospitals. Hence, analysts of IIFL Securities expect Ebitda margins to largely hold steady at ~26% over the next 3 years. They forecast 18% Ebitda Cagr over FY23-26. Maintain BUY rating with a TP of Rs 2,150 (18% upside).
Enough headroom to grow in Telangana/AP:
KIMS’ IP volumes in existing hospitals (ex-Sunshine/Nagpur) grew 11% YoY in Q1 and analysts of IIFL Securities believe there is further scope to drive volume growth since the company intends to operate at 70-75% occupancies in these markets post addition of 1,500 beds as well over the next 3-4 years. While Ebitda margins in Telangana cluster at 31% in Q1 (vs 35% in Q4) were impacted by corporate overheads for expansion projects and Q1 seasonality, which should normalise, mgmt believes that margins in AP hospitals can improve to 25-27% vs 22% in Q1.
Multiple levers of margin improvement in Sunshine/Nagpur over the next 2 years, driven by (a) Relocation of Sunshine to new Begumpet campus in Q2, which will enable KIMS to recruit additional doctors and improve occupancies from current levels of 44%. (b) 200-300bps margin improvement can accrue at Sunshine Gachibowli from insourcing of diagnostics business (c) 60-70% of new doctor onboarding at the Nagpur hospital will be completed over the next 3 quarters. KIMS believes Sunshine can clock 30% margins (vs 23% in Q1) driven by better case mix & improving occupancies, while Nagpur hospital can clock 25-27% margins (vs 6% in Q1) post expansion of the doctor team over the next 24 months.
Capacity-addition plans well on track:
2 new hospitals in Bangalore (750 beds) to be operationalised by H1FY25, Nashik hospital (300 beds) to be operationalised by Q4FY24/Q1FY25, and Thane hospital (300 beds) to be operationalised by Q2FY25. Analysts of IIFL Securities have assumed combined start-up Ebitda losses of Rs300mn from these 3 hospitals in FY25.
Related Tags
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Securities Support WhatsApp Number
+91 9892691696
www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.