HealthCare Global Enterprises' Q2FY17 results (Outperformer) - Strong operating performance
Q2FY17 result highlights
- Revenues grew by 21% yoy to Rs1.7bn marginally ahead of our estimate of Rs1.71bn with the HCG centres posting a growth of 20.9% yoy and the Milann centres growing at 20.3% yoy.
- Reported EBITDA of Rs254mn (+26% yoy) was marginally ahead our est of Rs236 with margins of 14.6% (our est 13.8%). Excl the loss from the new centres (Rs18.4mn) the existing centres EBITDA stood at Rs272mn. Gross margins for the quarter which stood at 76.1% improved by 70bps qoq and 200bps yoy.
- Reported PAT of Rs49mn was above our est of Rs43mn aided ny better margins despite a higher tax rate of 36% (our est 34%).
Key positives: Higher ARPOB, Breakeven in newer centers at Bhavnagar and Gulbarga.
Impact on financials: We have maintained our FY17/18E financials
Valuations & view
Attractive valuations – Initiate with Outperformer: HCG’s business model is custom designed to provide quality/comprehensive cancer care at competitive prices on a pan-India basis, with focus on non-metro locations. The company’s asset light approach with focus on partnering has made its business model capital efficient and scalable. The fertility treatment segment, operated under brand Milann, follows broadly similar tenets. HCG is among the most scalable Indian healthcare models, with focus on high-potential cancer care/fertility segments. Steady growth across 17/9 existing/new cancer centres should trigger 20%+ revenue/earnings CAGR in the next 3-5 years with limited incremental capex spend. Moreover, leverage-related concerns have largely been addressed by HCG’s recent IPO. Current valuations at 19x FY18E EBITDA are compelling versus listed Indian peers. We maintain our Outperformer rating.
HealthCare Global Enterprises Limited is engaged in managing cancer hospitals, cancer centers and medical diagnostic services, including scientific testing and consultancy services in the pharmaceutical and medical sector. The Company is involved retail sale of pharmaceuticals, medical and orthopedic goods and toilet articles. It operates cancer care network under the HCG brand. It operates infertility treatment clinics providing assisted reproductive services under brand Milann. Its Milann fertility centers provide reproductive medicine services, including assisted reproduction, gynecological endoscopy and fertility preservation; and follow a multidisciplinary and technology-focused approach to diagnosis and treatment. Milann fertility centers also offer training programs for fertility specialists and embryologists. Under the Triesta brand, it provides clinical reference laboratory services with specialization in oncology, including molecular diagnostic services and genomic testing.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.