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Hospitals earnings trend- decent numbers driven by ARPOB improvement and bed additions

ICICIdirect Research 09 Aug 2024 DISCLAIMER
  • 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
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