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Q1-FY23 Result Update

* Krishna Institute of Medical Sciences Ltd (KIMS) reported consolidated revenues of ?4,955.1 million, a growth of 4.7% year over year. On Consolidated basis, during Q1 FY23 ARPOB was ?30,192 as compared to ?27,289 during Q1 FY22. The Occupancy ratio based on Operational Census Beds stood at 65.5% during Q1 FY23 of which KIMS occupancy ratio was 71% while Sunshine had an occupancy ratio of 39.5%. Overall occupancy was lower in April and May month however June and July have normalized with occupancy back to 74%-75%.

* Consolidated EBITDA came in at ?1,371.6 million, a de-growth of 4.5% YoY. EBITDA margin during Q1FY23 was 27.68%. KIMS saw ~268 basis points contraction YoY in margin during Q1 FY23. EBITDA margins contraction was primarily because of consolidation of Sunshine hospitals which is operating at 17.8% EBITDA margin and also increased cost of employees, doctor and power and fuel cost at existing KIMS hospitals. On the bottom-line front, PAT stood at ?699.6 million for the quarter, a de-growth of 21.5%.

* On Standalone basis, the average revenue per operating bed (ARPOB) improved to ?26,341 during the Q1FY23 as compared to ?25,144 during Q4FY22. On consolidated basis, the average length of stay (ALOS) has improved to 4.14 days during Q1FY22 from 4.59 days on QoQ basis. The average revenue per patient (ARPP) had decreased from ?1,49,000 in Q1FY22 to ?1,25,000 in Q1FY23, registering a de-growth of ~16% YoY. This was on account of muted volumesin the month of April and mid of May. Out of 3,666 bed capacity, 3,222 beds are currently operational.

? On Capex front, over next 18 month KIMS would be spending ~ ?300 crore on Bangalore hospital and ~?170 crore on Nasik hospital. The company will complete the capex using internal accruals however it might take intra quarter or intra year loan. The company anticipates that their Nasik and Bangalore hospitals would get operational within the next ~15-18 months.

? The acquisition of Sunshine hospital has been completed. Sunshine Hospital has national reputation in the orthopedics segment. The acquisition of Sunshine Hospitals will enable KIMS to reach more patients particularly from the orthopedic segment. Sunshine’s current occupancy stands at 40-45% with ~70% of revenue coming from Ortho and Cardiac specialty.

? KIMS provides regional leadership driven clinical excellence and affordable healthcare. It has good track record of operational and financial performance. With successful Acquisition and planned Capex in pipeline, KIMS is well positioned to consolidate in India’s large, unorganized yet rapidly growing and underserved affordable healthcare market. We recommend BUY on the stock with a revised target price of ?1,520 per share.

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