Buy Narayana Hrudayalaya Ltd for the Target Rs.2,500 by Choice Institutional Equities
Key Conference Call Highlights
India Business
* India hospital margin continued to improve, driven by higher realisation, payor mix optimisation, infrastructure transformation initiatives and increasing contribution from complex procedures.
* The management indicated that Bengaluru remains the flagship quaternary care hub, while the upcoming Rajarhat project is expected to significantly strengthen Kolkata’s advanced care capabilities.
* The clinics business continued to operate at a similar cash burn level as the company aggressively expands its network, with each clinic typically taking around 18 months to break even.
* The company plans to double the number of clinics in Bengaluru and expand the clinic network into Kolkata in FY27E.
Cayman Business
* The Cayman hospital business continued to deliver a strong revenue growth, supported by the integrated care model and synergies between insurance and hospital operations.
* The Cayman insurance business scaled up much faster than anticipated, achieving an annualised premium revenue run-rate of nearly USD 60 Mn within a short period.
* The management projects Cayman insurance losses to moderate significantly in the next three quarters aided by premium price hike and exit from unprofitable accounts.
* International patient inflow from neighbouring Caribbean markets are gradually gaining traction and are expected to become a larger growth driver over time.
UK Business
* The key focus areas in the UK are increasing the share of higherpaying private and self-pay patients and reducing operational cost through technology integration.
* The UK acquisition involved a GBP-150 Mn, seven-year loan taken and serviced locally in GBP, which eliminates currency risk.
* The acquisition caused a 500 bps EBITDA margin dilution at the consolidated level, of which approximately 200 bps are a one-time acquisition cost that will not repeat, resulting in an effective normalised dilution of around 300 bps.
Expansion Plans
* The company outlined a total proposed CapEx pipeline of nearly INR 30 Bn, with annual spending expected to scale up materially in FY28 and FY29.
* All four projects — Rajarhat, HSR, Raipur and Bengaluru — are expected to be commissioned by FY28E.
* Greenfield project execution in FY26 was affected by electionrelated issues, labour shortages and delays in regulatory approvals.
Outlook
* The management stated that clinics are becoming an important feeder channel for hospitals by helping NH access newer patient segments and drive referrals for advanced therapies.
* The management expects healthy ARPOB growth to continue, supported by efficiency gains, with year-on-year price increases, typically in the low to mid-single digit range.
* India hospital margin is expected to remain resilient, although upcoming losses from new facilities could partly offset margin gains
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SEBI Registration no.: INZ 000160131
