Indraprastha Medical - Initiating Coverage - A short and sweet cure :Centrum

Rating: Buy; Target Price: Rs55; CMP: Rs35; Upside: 57.6%

A short and sweet cure

We initiate coverage on Indraprastha Medical Corporation (IMCL) with a
Buy recommendation. IMCL has been efficiently managed by Apollo
Hospitals Group, pioneers in the healthcare industry for over 25
years. In this resource scarce industry with a large demand supply
gap, IMCL offers world class medical treatment at affordable cost.
IMCL has consistently paid dividends in the past 10 years and grew by
over 15%CAGR in the period. The company is a pioneer in kidney and
liver transplantation and derived ~13% revenues from it in FY13. Our
target price of Rs55 is based on 8xDec'15 EPS of Rs6.9. Key risk to
our call is the pending PIL case in the Supreme Court on provision of
free medicines and consumables to poor patients and the attrition of
key doctors and para medical staff in its hospitals.
$ Efficient management to drive growth: IMCL has been efficiently
managed by Apollo Hospitals Group, a pioneer in hospital management
for over 25 years. It offers affordable international standard medical
care in New Delhi offering 57 specialties under one roof. IMCL has
been adjudged the best private multi-specialty hospital in Delhi for
the fifth consecutive year. Its Noida hospital achieved break-even in
FY13 and is operating at ~100% capacity utilisation. IMCL has an
asset-light model with nominal lease rentals for its two hospitals. In
the resource scarce healthcare industry, world class treatment at an
affordable cost will drive future growth of the company.
$ Multiple growth drivers: IMCL is the pioneer in kidney and liver
transplantations. The company achieved 57%CAGR in kidney
transplantation and 34%CAGR in liver transplantation over FY10-FY13.
These procedures collectively contributed ~13% to the company's
revenues in FY13. IMCL is a leading player in medical tourism. We
expect IMCL's medical tourism to grow at 17%CAGR to Rs1,130mn in FY16
from Rs703mn in FY13. The main growth driver will be patients from
Tanzania. IMCL completed the expansion project of adding of 127 beds
(22% addition) in FY13. The total number of beds has increased to 710
from 583. We expect these initiatives to drive future growth.
$ State-of-the-art hospitals: IMCL's two hospitals at Sarita Vihar and
Noida are equipped with state-of-the-art facilities for liver and
kidney transplantation, heart surgeries and ICU, dialysis, bone marrow
transplants among others and has a Da Vinci robotic surgical system.
IMCL's cardiac (CVS), neurology (CNS), oncology and orthopaedic
segments are major revenue contributors accounting for over 52% of
revenues. IMCL was accredited by Joint Commission International (JCI),
US as the first internationally accredited hospital in India in 2005
and re-accredited in 2008 and 2011. Noida Hospital's Laboratory
Services were re-accredited by National Accreditation Board for
Testing and Calibration Labs (NABH) in March'13.
$ Valuations and key risks: IMCL has achieved 15.5%CAGR in revenues,
13.7%CAGR in EBIDTA and 7.1%CAGR in net profit over past 10 years.  As
the domestic healthcare industry has a large demand-supply gap, IMCL
will report good performance in the future. We expect IMCL to report
15.4%CAGR in revenues, 23.5%CAGR in EBIDTA and 32.5%CAGR in net profit
over FY14-16. We initiate coverage on IMCL with a Buy rating with
target price of Rs55 based on 8x Dec'15 EPS of Rs6.9 with an upside of
57.6% from the CMP. Key risks to our call is the pending PIL case in
the Supreme Court on providing free medicines and consumables and the
attrition of key doctors and para-medical staff in its hospitals.

Thanks & Regards

--

��

-->