Stock of the Week : Buy Krishna Institute of Medical Sciences Ltd for Target Rs. 874 - GEPL Capital
Krishna Institute of Medical Sciences Limited is one of the largest corporate healthcare groups in AP and Telangana in terms of number of patients treated and treatments offered. It provides multi-disciplinary integrated healthcare services.
Investment Rationale
* Margin expansion to be driven by mature clusters: In FY2025, KIMS reported EBITDA margins of 25.8% driven by EBITDA growth in mature clusters such as Telangana and Andhra Pradesh. Telangana Cluster showcased a margin expansion of 32% margin due to revenue growth and new initiatives, including on boarding of new doctors and a new liver transplant team in Secunderabad, which boosted high ARPOB specialties. Management is anticipating EBITDA margins of mature clusters should be maintained at 27-30% margins, with newer clusters showing consistent growth.
* Broadening geographic footprint beyond core states: KIMS has been expanding its geographical presence and lowering its dependence on only two states Andhra Pradesh and Telangana for revenue growth. The company has completed the majority of the capex in Bangalore and Thane. Total capex for the next two financial years (FY26-FY27) is estimated at INR 600-700 crores, primarily for maintenance and new units like Srikakulam, Ongole, Anantapur, and medical equipment for Kondapur.
* ARPOB set to rise with growth in Oncology and transplant: For mature clusters like Andhra and Telangana, pure ARPOB growth is projected at 4-5%. The ARPOB for Andhra is around INR 23,000-24,000 and is projected to reach INR 30,000 in the next few years with a mix of payer and case mix improvements, driven by new services like transplant and oncology. Overall ARPOB will also benefit from new OP-based technologies that require minimal operational costs. The overall group ARPOB of INR 40,000 is expected to trend higher towards INR 50,000-75,000 over the next 2-3 years due to additions in larger cities and growth in the Telangana cluster.
* Valuations: We model a Revenue/PAT CAGR of 15%/17% and estimate KIMS to clock PAT of Rs 600 Cr by FY28E. KIMS is trading at forward PE(x) of 50.7x and we value at 58.2(x) FY28E and Recommend BUY on KIMS with target Price of Rs. 874 (15%).
Observation
* KIMS has been outperforming the broader market despite prevailing volatility and weakness, indicating strong relative strength.*
* On the monthly timeframe, the stock continues to form a higher top and higher bottom structure, reinforcing a bullish long-term trend.
* In the previous week, KIMS broke out from an 11-week consolidation range, and the positive close in the current week confirms follow-through buying.
* The stock is comfortably sustaining above its key 12, 26, and 50-day EMAs, reflecting strong trend alignment and underlying strength.
* Additionally, the RSI stands at 67, highlighting a noticeable acceleration in upside momentum.
Inference & Expectations
* Considering these factors, it can be inferred that KIMS stock is set to continue uptrend.
* Going ahead we expect the prices to move higher till 874 level.
* The stop loss must be at 710 level, strictly on the closing basis.
SEBI Registration number is INH000000081.
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