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Hospital Q4FY22 Preview: Buoyancy to sustain despite initial Omicron scare

ICICI Securities 08 Apr 2022

What’s buzzing: 

Covid (Omicron) led initial hindrances notwithstanding, we expect coverage hospitals to report more or less normal (sequentially flattish) on the back of persistent pent-up demand from elective surgeries during the second half of the quarter.

Context: 

Hospitals had to deal with the swift Omicron wave in the first half of Q4 resulting in slower IPD (surgeries and diagnostics which contribute bulk of revenues to hospitals) momentum initially. However, since the reported hospitalisation rate was significantly lower than Delta variant, we expect occupancy levels to have recovered swiftly. International patient mix is expected to be below pre-Covid level amid curbs on inbound airlines.

Perspective: 

With a hands-on experience in dealing the pandemic (two Covid waves), we believe the hospitals would have been well equipped to deal with the Omicron wave. Amid optical initiatives like tele-consultation, digital app based drives for treating patients at remote locations, zoning of patients besides higher focus on insurance/out of pocket payees, we expect the hospitals universe to maintain Q3FY22 momentum and post revenues of Rs 7761.7 crore. Post the onset of Covid, hospitals are increasingly adopting lots of cost optimisation initiatives such as variable pay model for doctors, digital drives etc. These, along with maturing profile of hospitals, reduction in ALOS with ramp up in occupancy and ARPOB levels, have led to better margin profile for most of the hospitals. EBITDA of the I-direct hospital universe is expected to increase 2.4% QoQ to Rs 1279 crore. EBITDA margins are likely to remain healthy at ~ 16.5%.

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