MOSL: FORTIS HEALTHCARE (Buy)-Sequential improvement visible-recovery pace slower than expected
​Fortis Healthcare: Sequential improvement visible; recovery pace slower than expected
(FORH IN, Mkt Cap USD1.2b, CMP INR166, TP INR220, 33% Upside, Buy)
- Sales increased 3.2% YoY to INR11.6b, missing our estimate of INR12.2b, due to the impact of demonetization and stent price control. EBITDA rose 38% YoY to INR861m (est. of INR941b), with the margin at 7.4% (v/s est. of 7.7% and 5.6% in 1QFY17). Adj. PAT increased 41.1% YoY to INR228m.
- Demonetization and stent price control impacted numbers: Hospital revenue rose 3% YoY/QoQ to INR9.4b. EBIDTAC stood at INR1.3b, with the margin at 13.5% (+150bp QoQ, -170bp YoY). Occupancy levels stood at ~71% v/s 70% in 4QFY17 and 74% in 1QFY17. Diagnostic EBITDA margin contracted 400bp YoY (-130bp QoQ) to 18.4%, led by pricing pressure, high marketing expense and change in business mix. Stent price control continued to impact Hospital growth. FORH expects sequential improvement in 2Q, with strong double-digit growth in 2H, as the impact of stent pricing and demonetization will be in the base.
- Earnings call takeaways: 1) Annual capex in Hospital expected to be INR2-2.5b. 2) Ludhiana and Chennai-based greenfield hospitals to start in FY18. 3) SRL EBITDA margin to improve by at least 100bp annually in the medium term. 3) Hospital margin to bounce back to 15% in 2H. 4) BT cost to stay in the current range for the rest of FY18. 5) FEHI margin expected to improve from current levels of ~10% on pick-up in newly added therapies, including nephrology and ortho. 6) Double-digit growth in SRL in 1Q was primarily driven by volume growth.
Fortis Healthcare Limited is an integrated healthcare delivery service provider. The Company is engaged in establishing, maintaining, operating, running, managing or administering hospitals, medicare, healthcare, diagnostic, health aids and research centers. The Company operates through the Clinical Establishments Division and the Medical Services Division. The Clinical Establishments Division owns, maintains and operates clinical establishments (being fully air conditioned institutions established, and specifically customized and duly fitted with all fixtures, fittings, certain medical equipment and infrastructure required for running and operating the hospitals), as well as provides services under outpatient division and radio-diagnostic services. The Medical Services Division undertakes the business of running the hospital operations, including in-patient services and emergency services. The Company operates its healthcare delivery services in India, Dubai, Mauritius and Sri Lanka.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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