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H i g h e r i n t e r e s t c o s t w ei g h s o n p r o f i t a b i l i t y …
Fortis Healthcare’s Q1FY12 revenues grew 70% YoY to | 610 crore (Idirect estimate: | 571.1 crore) mainly on account of additional revenue
inflow of | 127 crore from Super Religare Labs. The organic growth stood
at 35% over the corresponding period last fiscal. The inorganic growth
remained higher than our estimates. Operating margins saw a sequential
improvement of over 200 bps on account of an improvement in utilisation
levels of newly commissioned hospitals. However, its profitability got
impacted mainly due to a sharp rise in interest cost that almost doubled
from | 30.1 crore to | 59.9 crore sequentially due to forex movement on
FCCBs and incremental borrowings to fund its expansion plans. Due to
this, the company reported a net loss of | 12.8 crore for the quarter.
ƒ Increase in capacity drives revenue growth
With the addition of six new hospitals and acquisition of Super
Religare Labs, the company has been able to post revenue growth
of 71% YoY during the quarter while organic growth stood at 35%
YoY. Hospitals with a maturity period of three years and more (i.e.
78% of operating revenue) continued to perform better recording
average occupancy levels of over 76% (up 100 bps YoY) and
average revenue per bed of | 0.9 crore per annum.
ƒ Higher interest cost takes a toll on bottomline
Despite an improvement in the operating performance, the
company have been unable to improve its profitability on account of
a sharp rise in finance cost. The increase in finance cost was mainly
due to mark to market losses on foreign loans, reset of interest rates
for long-term loans and incremental borrowings for acquisitions.
V a l u a t i o n s
At the CMP of | 118, the stock is trading at 18.8x and 14.8x its FY12E and
FY13E EV/EBITDA, respectively. The valuations looks stretched compared
to its peer set. Also, we believe, the merger of its international entity
would continue to put pressure on its profitability, going forward, on
account of higher debt and lower profitability of the international firm.
Hence, we remain neutral on the stock with a revised price target of | 130
(i.e.15x FY13E EV/EBITDA). We have a HOLD rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
H i g h e r i n t e r e s t c o s t w ei g h s o n p r o f i t a b i l i t y …
Fortis Healthcare’s Q1FY12 revenues grew 70% YoY to | 610 crore (Idirect estimate: | 571.1 crore) mainly on account of additional revenue
inflow of | 127 crore from Super Religare Labs. The organic growth stood
at 35% over the corresponding period last fiscal. The inorganic growth
remained higher than our estimates. Operating margins saw a sequential
improvement of over 200 bps on account of an improvement in utilisation
levels of newly commissioned hospitals. However, its profitability got
impacted mainly due to a sharp rise in interest cost that almost doubled
from | 30.1 crore to | 59.9 crore sequentially due to forex movement on
FCCBs and incremental borrowings to fund its expansion plans. Due to
this, the company reported a net loss of | 12.8 crore for the quarter.
ƒ Increase in capacity drives revenue growth
With the addition of six new hospitals and acquisition of Super
Religare Labs, the company has been able to post revenue growth
of 71% YoY during the quarter while organic growth stood at 35%
YoY. Hospitals with a maturity period of three years and more (i.e.
78% of operating revenue) continued to perform better recording
average occupancy levels of over 76% (up 100 bps YoY) and
average revenue per bed of | 0.9 crore per annum.
ƒ Higher interest cost takes a toll on bottomline
Despite an improvement in the operating performance, the
company have been unable to improve its profitability on account of
a sharp rise in finance cost. The increase in finance cost was mainly
due to mark to market losses on foreign loans, reset of interest rates
for long-term loans and incremental borrowings for acquisitions.
V a l u a t i o n s
At the CMP of | 118, the stock is trading at 18.8x and 14.8x its FY12E and
FY13E EV/EBITDA, respectively. The valuations looks stretched compared
to its peer set. Also, we believe, the merger of its international entity
would continue to put pressure on its profitability, going forward, on
account of higher debt and lower profitability of the international firm.
Hence, we remain neutral on the stock with a revised price target of | 130
(i.e.15x FY13E EV/EBITDA). We have a HOLD rating on the stock.
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