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Fortis Healthcare Limited - Good F2Q11; New Launches Hold the Key
Quick Comment: Good F2Q11 results. Operating
revenue increased 88% YoY (27% excluding Wockhardt
acquisition) to Rs3.58 bn, operating profit margins
compressed 170 bps YoY (down 13 bps QoQ), and
together led to 61% rise in adjusted net profit to Rs209
mn. Revenue for Wockhardt acquired hospitals stood at
Rs1.05 bn.
Importantly, three new projects commenced during
the quarter. Fortis launched: (i) Shalimar Bagh - 150
beds operational and witnessed strong traction with 80%
occupancy levels in the 1st month of operation; (ii)
Kolkatta - 150 beds operational; and (iii) Mulund - 110
bedded oncology block. In addition, the company
launched oncology in Fortis Noida. Fortis expects its
flagship hospital in Gurgaon to commence operations in
the next six months.
Operating margins declined 170 bps YoY (13 bps
QoQ) to 13.9% mainly due to: (i) start-up cost at new
hospitals (Shalimar Bagh, Kolkatta and oncology block
at Mulund); and (ii) lower margins at Wockhardt
acquired hospitals. Adjusted for start-up costs,
operating margins expanded 147 bps QoQ.
Additional capex required for existing pipeline of
greenfield/brownfield projects (~1,579 beds) aggregate
~Rs5 bn. Net cash as of September 30 stood at Rs11.5
bn.
Retain Overweight rating. A combination of significant
bed additions over F2011-13, strongly performing
mature hospitals, and gradual improvement in the
operational parameters of Wockhardt acquired hospitals
drives our Overweight call (detailed in Well Positioned
Hospital Play; Initiate at OW, October 21). Management
highlighted that Fortis will be an India focused player.
Other conference call highlights
Key clinical highlights during the quarter are:-
• Fortis Escorts Delhi obtained regulatory approval to
participate in clinical trials for using bio-absorbable
cardiac stents.
• Fortis started a dedicated oncology block at Noida
facility. Its first bone marrow transplant was
successfully carried out at this block.
• Fortis performed its first shoulder replacement
surgery successfully at Fortis Hospital, Mohali.
• Fortis Escorts Delhi launched its Heart Command
Centre at Regency Medical Centre, Tanzania and a
paediatric interventional cardiac unit at RAK Hospital
in Dubai.
Fortis tendered its entire Stake in Parkways in Khazanah’s
Voluntary General Offer (VGO) for S$3.95/share. Under this
transaction Fortis recorded net profit of Rs539 mn.
International patients: Revenue from international patients
aggregated Rs245 mn (up 200% YoY).
Shalimar Bagh facility: Fortis launched Shalimar Bagh
facility in F2Q11 with 150 beds. It has seen strong traction with
occupancy levels reaching at 80% in the first month of
operations. Total capex spent for Shalimar Bagh aggregates
Rs1.8 bn.
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