Buy KIMS Ltd for the Target Rs 850 by Emkay Global Financial Services Ltd
We met Dr Nitish Shetty, MD of the KIMS Bengaluru cluster, along with a group of investors, to understand the company’s strategy and execution in this emerging growth cluster. KTAs:
1) KIMS is differentiating itself from incumbent corporate hospitals by positioning itself as a quaternary care operator focused on specialties such as onco, neuro, and gastro. It has also established a strong transplant program, conducting 100 transplants over the last 12 months.
2) The management described the Bengaluru cluster as fragmented into 5-6 key micromarkets, primarily driven by IT hubs and limited patient mobility beyond an 8- 10km radius across the city, allowing multiple corporate hospitals to co-exist and dominate specific specialties in each market.
3) With a current capacity of 800 beds, the management plans to expand to ~2.2k beds through units in Whitefield (250 beds) and Sarjapur (600 beds).
4) KIMS plans to align its tariffs with cluster leaders as occupancy ramps up (currently ~20% lower). Most private insurance empanelments are complete at both units, with only GIPSA empanelment pending.
5) The Mahadevapura facility continues to operate at or above breakeven levels, while Electronic city is expected to breakeven within the next 1-2 months, indicating a steep ramp-up in these greenfield units despite the presence of strong corporate hospital chains. We retain BUY with an unchanged Sep-27E TP of Rs850, based on 26x Sep-28E EV/pre-IndAS EBITDA (excluding minorities).
Bengaluru playbook - Focus on high-end quaternary care
KIMS has successfully ramped up its Bengaluru cluster by focusing on high-end quaternary care, with onco, neuro, and gastro as core specialties. While the Bengaluru market remains fragmented into distinct micro-markets due to IT-hubs and limited patient movement across the city, patients are willing to travel across markets for highacuity care such as neuro and onco. Leveraging this, the management has built a centralized Tumor Board that assigns ownership of all tumor cases to the onco department, enabling end-to-end patient care while avoiding inter-department disputes common at legacy hospitals. Encouraged by the success of these units across distinct micro-markets, KIMS plans to strengthen its presence in the city to ~2.2k beds.
New clusters ramping up well; maintain BUY
KIMS’s new clusters (Maharashtra, Bengaluru, and Kerala) have shown strong improvement, with Nashik achieving breakeven in 1Q, Mahadevapura and Thane in Jul26, and Electronic City guided to breakeven within the next 1-2 months. This, in addition to KIMS’s dominant presence in its core clusters, should drive strong profitable growth over the next 3 years, in our view. We expect revenue/EBITDA CAGR of 20/31% over FY26-29, as we model the continued ramp-up of new clusters, especially Bengaluru (Rs5.5/0.6bn revenue/EBITDA in FY28E); maintain BUY. Key risks: Delays in insurance empanelment, pledging of promoters’ shareholding, and any adverse regulatory ruling for healthcare services.
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