Add Global Health Ltd For Target Rs. 1,350 - Choice Broking Ltd
Medanta – The Medicity, Gurugram
We visited the Medanta – The Medicity, Gurugram, and met with Mr. Yogesh Kumar Gupta - Chief Financial Officer.
Management guidance: The growth will primarily be fueled by increased volume, expansion into new markets, available cash to support the growth strategy, and improved margins due to operating leverage.
* About the facility: Medanta – The Medicity, located in Gurugram and founded in 2009, is the largest private hospital in Delhi-NCR at a single location. It has a bed capacity of 1,440, including 316 ICU beds, 40 operating theatres, over 30 specialties, more than 1,000 doctors, and generates 10-12% of its revenue from international patients
* The hospital holds JCI, NABH, and NABL accreditations. It spans 43 acres with a built-up area of over 2Mn sq. ft. The campus also has space allocated for the development of a Medanta Medical College and a 250- bed Medanta Guest House, with construction already underway. These additions are designed to provide comprehensive services for international patients and those from outside Delhi-NCR. Over 50% of the hospital's patient footfall comes from outside the Delhi-NCR region.
* The facility consists of 15 floors, each focused on specific specialties including oncology, cardiology, digestive, neurology, urology, internal medicine, and orthopedics. While there is no dedicated floor for international patient, certain areas within the super-specialty floors are allocated for their care, along with a common OPD for other therapies.
* Expansion Plan: With a long-term goal of reaching a bed capacity of over ~6,100, Medanta is implementing an ambitious capital expenditure strategy and expanding into new regions, including Mumbai-Oshiwara.
* In addition, it is reinforcing its footprint in the Delhi region with plans to add approximately 1,150 beds, focusing on the high-growth, densely populated areas of North and South Delhi. We project that the total bed count will exceed ~1,000 by FY27.
Growth in the Operating Metrics:
* ARPOB: It is expected to rise due to an increase in complex cases and a growing influx of international patients, driven by the upcoming Noida International Airport, expecting INR 66,800 for FY27.
* ALOS is most efficient in the industry, as 3.17 days, as the focus is not to keep the patient for longer time but use that bed for another patient, expecting it to continue lead in the industry.
* International Patient: The primary focus is on increasing patient footfall with higher tariff and 100% cash payment, which helps improve the overall payer mix. However, the impact on margins is constrained due to the brokerage fee, which makes up 35-40% of the revenue.
* Payer Mix: MEDANTA’s +80% of revenue comes from cash/TPA, so acquiring remaining business from the government doesn’t significantly dilute margins, expecting it to sustain at similar levels. Concern is delayed payment from the government, which takes 6-9 months.
* Robotics Surgery: It is certainly revenue-accretive, but it doesn't significantly boost margins due to the higher fixed and operational costs associated with it. While it's beneficial to have this service within the facility, it’s not essential or mandatory.
* Doctor Model: Each doctor will be on a fixed salary and assigned to a specific department. Additionally, senior doctors are eligible for a quarterly bonus, which is tied to the doctor’s surgery fees.
View & Valuation:
We maintain our ADD rating with a target price of INR 1,350, valuing the stock at 27x FY27E EV/EBITDA.
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SEBI Registration no.: INZ 000160131
