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Hospitals earnings trend- decent numbers driven by ARPOB improvement and bed additions
- Combined revenues of 5 pan-India hospitals put together have grown 14% YoY to ₹ 6416 crore. The growth was driven by 11% ARPOB growth and 3% growth in occupancy.
- 10% aggregate beds addition over the last year has also contributed to the growth.
- EBITDA growth was even higher at 17% YoY to ₹ 1355 crore during the period, driven by improving payor-mix and case-mix besides better operating leverage. EBITDA margins for the pack stood at 21%.
- Improving payor-mix (private insurance covered patients / International tourists and lower government scheme patients) has helped the companies to generate better ARPOB. The proportion of private insurance covered patients has gone up at the expense of government scheme patients.
- Similarly, better case-mix (higher number of critical surgeries such as organ transplants, complex cardiovascular surgeries, cancer treatments etc.) has helped the companies to generate better ARPOB as well as margins. Complex surgeries and procedures now account for ~15% of the overall procedures for these players as against ~12% in the last year.
- Most of the new hospital assets inducted in the last 5-7 years are turning profitable, boosting the combined average ROCE which is now trending at 19% as against 9% in FY20.
- With very less balance sheet stress and comfortable leverage position, these companies are entering into a new capex phase (+7000 beds additions over the next 2-3 years) which is a good 40% expansion over the existing capacity.
- Our picks in the Hospital sector - Narayana Hrudayalaya- TP ₹ 1485, Shalby- TP ₹ 350, HCG- TP ₹ 435
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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