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Fortis Healthcare (FOHE.BO; Rs164.45; 1L)
Takeaways from Mumbai — Fortis Healthcare presented at the Citi India
Investor Conference in Mumbai. Below are key takeaways.
What’s New — 1) New hospitals (Shalimar Bagh, Mulund Onco and Kolkata)
continue to ramp up well and are expected to achieve break even within the first
two years of operations; 2) New projects are on track and expect Gurgaon &
Kangra hospitals to come online during FY12 adding capacity of 550 beds; 3)
FOHE plans to open Oncology blocks at Mohali and Jaipur hospitals.
SRL Acquisition — FOHE has acquired 71% stake in SRL for Rs8bn in cash
(plus Rs4bn of debt). Increase in patient footfalls across Fortis network,
geographical complementarity (SRL is present across 400 cities) and large
patient database for CRM and research highlighted as the key benefits from the
acquisition.
Maturity Profile of hospitals: a margin lever — The older hospitals have a
higher EBITDA and a higher ARPOB compared to the newer hospitals. Four
hospitals (out of 22 own hospitals) that are older than 5 years contribute 24% of
revenue but 34% of the EBITDA (EBITDA margin at 26%) whereas 1-3 years old
hospitals (nine) contribute 13% of the revenue but only 9% of the EBITDA
(EBITDA margin at 14%). FOHE expects the newer hospitals to achieve a similar
EBITDA margin (~25% +) as they mature (>5 years old).
Other Key Takeaways — 1) Strong Growth in procedures across key focus
areas – Neuro (+62%), Ortho (+52%), Dialysis (+41%) and Cardiac (+31%)
which is expected to continue; 2) SRL to be consolidated from May 2011.
Maintain Buy (1L) — We remain positive on the healthcare delivery space in
India and maintain Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Fortis Healthcare (FOHE.BO; Rs164.45; 1L)
Takeaways from Mumbai — Fortis Healthcare presented at the Citi India
Investor Conference in Mumbai. Below are key takeaways.
What’s New — 1) New hospitals (Shalimar Bagh, Mulund Onco and Kolkata)
continue to ramp up well and are expected to achieve break even within the first
two years of operations; 2) New projects are on track and expect Gurgaon &
Kangra hospitals to come online during FY12 adding capacity of 550 beds; 3)
FOHE plans to open Oncology blocks at Mohali and Jaipur hospitals.
SRL Acquisition — FOHE has acquired 71% stake in SRL for Rs8bn in cash
(plus Rs4bn of debt). Increase in patient footfalls across Fortis network,
geographical complementarity (SRL is present across 400 cities) and large
patient database for CRM and research highlighted as the key benefits from the
acquisition.
Maturity Profile of hospitals: a margin lever — The older hospitals have a
higher EBITDA and a higher ARPOB compared to the newer hospitals. Four
hospitals (out of 22 own hospitals) that are older than 5 years contribute 24% of
revenue but 34% of the EBITDA (EBITDA margin at 26%) whereas 1-3 years old
hospitals (nine) contribute 13% of the revenue but only 9% of the EBITDA
(EBITDA margin at 14%). FOHE expects the newer hospitals to achieve a similar
EBITDA margin (~25% +) as they mature (>5 years old).
Other Key Takeaways — 1) Strong Growth in procedures across key focus
areas – Neuro (+62%), Ortho (+52%), Dialysis (+41%) and Cardiac (+31%)
which is expected to continue; 2) SRL to be consolidated from May 2011.
Maintain Buy (1L) — We remain positive on the healthcare delivery space in
India and maintain Buy.
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