Q3FY20 result highlights
Impact on financials: Reduce FY20/FY21 EBITDA est by 4/3% to account for slower than expected ramp in new hospitals. We introduce FY22 est
Valuations & view
HCG is among the most scalable Indian healthcare models, with focus on high-potential cancer care/fertility segments. The successful ramp-up of recently commissioned centers, as reflected in its breakeven within 12 months of commissioning for most units and limited start-up losses, significantly enhances comfort in the model’s scalability. On the flip side, HCG’s aggressive expansion strategy has created a fairly leveraged balance sheet and suppressed profitability as the start-up losses have subsumed the steady improvement in mature centres’ profitability growth. With the capex cycle finally nearing an end, we expect these headwinds to starting easing off gradually. Maintain Outperformer with target price of Rs165 (14x FY21E EV/EBITDA).
Healthcare Global Enterprises Ltd. 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.
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Feasibility Study Results in December to be a Catalyst for this Junior
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