indraprastha medical - q4fy14 result update - centrum 26052014

8/9/2019 Indraprastha Medical - Q4FY14 Result Update - Centrum 26052014

1/7Centrum Equity Research is available on Bloomberg, Thomson Reuters and FactSet

Moderate growthWe maintain Buy rating on Indraprastha Medical Corporation (IMCL) with a

revised target price of Rs54 (earlier Rs60) based on 8xFY16E EPS of Rs6.7. IMCLsresults for Q4FY14 were below our expectations. The company reported moderaterevenue growth of 7%, 150bps decline in EBIDTA margin and 11% growth in netprofit. Increase in material cost, consultation fees to the doctors and otherexpenses led to decline in margin during the quarter. The company has betterreturn ratios and higher dividend yield than its peers. Key risks to ourassumptions include slowdown in the healthcare segment and increasedcompetition from large players.

Moderate revenue growth: IMCL reported moderate revenue growth of 7%YoY toRs1.67bn from Rs1.57bn during the quarter. However, revenue growth in FY14 washigher at 12%YoY due to higher growth in previous quarters. We expect revenuesto grow at 16% over the next two years in view of increased occupancy at SaritaVihar hospital and increase in revenues from the outpatient department.

Lower revenue growth results in drop in margins: IMCLs EBIDTA margin duringthe quarter fell by 150bps YoY to 11.5% from 13.0% due to the increase in thematerial cost, consultant fees to doctors and other expenses. The companysmaterial cost grew by 90bps to 23.3% from 22.4% due to lower sales growth.Consultant fees to doctors were up by 70bps YoY to 25.7% from 25.0%.Otherexpenses grew by 70bps to 19.1% from 18.4%. However, personnel expensesdeclined by 90bps to 20.4% from 21.3%.

Net profit indicates moderate growth: IMCLs net profit for the quarter grew by11%YoY to Rs72mn from Rs65mn due to 150bps drop in EBIDTA margin. Thecompanys interest cost declined by 13%YoY to Rs22mn from Rs25mn due to thebetter management of working capital. Its depreciation was marginally up toRs70mn from Rs69mn. IMCLs tax rate came down to 34.4% from 45.1% of PBT.

Recommendation and key risks: We have revised our FY15 and FY16 EPSestimates downwards by 12% and 9% respectively. At the CMP of Rs43, the stocktrades at 8.4x FY15E EPS of Rs5.0 and 6.3x FY16E EPS of Rs6.7 and 5.2x FY17E EPS ofRs8.1. We maintain Buy rating with a target price of Rs54 based on 8x FY16E EPS ofRs6.7 with an upside of 26.3% over CMP. Key risks to our assumptions includeslowdown in the healthcare segment and increased competition from large players.

Particulars (Rs mn) Q4FY14 Q4FY13 YoY Gr% Q3FY14 QoQ Gr% Q4FY14E %Var.

Total income 1671 1567 6.6 1,677 (0.4) 1809 (7.6)Total Expenditure 1,478 1,363 8.4 1,456 1.5 1,555 (5.0)EBIDTA 193 204 (5.3) 221 (12.8) 254 (24.1)EBIDTA Margin (%) 11.5 13.0 13.2 14.0Other income 8 9 (9.3) 1 3 160.0PBDIT 201 212 (5.4) 222 (9.5) 257 (21.9)PBT 109 118 (7.5) 125 (12.3) 155 (29.5)Prov. For tax 38 53 (29.5) 47 (19.5) 55 (31.6)PAT 72 65 10.5 78 (8.0) 100 (28.4)

Source: Company, Centrum Research Estimates

Target Price Rs54 Key Data

CMP* Rs43 Bloomberg Code IPMC IN

Upside 26.3% Curr Shares O/S (mn) 91.7

Previous Target Rs60 Diluted Shares O/S(mn) 91.7

Previous Rating Buy Mkt Cap (Rsbn/USDmn) 3.9/67

Price Performance (%)* 52 Wk H / L (Rs) 45/29.2

1M 6M 1Yr 5 Year H / L (Rs) 45/25

IPMC IN 6.2 20.3 16.3 Daily Vol. (3M NSE Avg.) 146922

Nifty 7.7 22.9 23.5

Source: Bloomberg, Centrum Research, *as on 23 May 2014

Shareholding pattern* (%)Mar-14 Dec-13 Sept-13 June-13

Promoter 51.0 51.0 51.0 51.0

FIIs 0.5 0.0 0.0 0.0

DIIs 0.9 0.9 0.9 0.9

Others 47.6 48.1 48.1 48.1

Source: BSE, *as on 23 rd May 2014Trend in EBIDTA margin (%)

Source: Company, Centrum Research

Trend in material cost (%)


Earning Revision

Particulars(Rs mn)

FY15E FY16E

New Old Chg (%) New Old Chg (%)

Sales 7,865 8,030 (2.1) 9,128 9,328 (2.1)

EBITDA 1,114 1,207 (7.7) 1,383 1,481 (6.6)

EBITDA Margin (%) 14.2 15.0 (8 0)bps 15.2 15.9 (70)bps

PAT 458 518 (11.6) 611 670 (8.8)

Source: Centrum Research

Ranjit Kapadia , ranjit. [email protected]; 91 22 4215 9645

Y/E Mar (Rsmn) Revenue YoY (%) EBITDA EBITDA (%) Adjust. PAT YoY (%) DEPS Rs. RoE (%) RoCE (%) P/E (x) EV/EBITDA (x)FY13 6,067 16.3 785 12.9 288 6.5 3.1 17.4 13.7 13.7 5.6FY14 6,776 11.7 909 13.4 355 23.4 3.9 19.8 16.1 11.1 4.7FY15E 7,865 16.1 1,114 14.2 458 29.1 5.0 23.0 19.1 8.6 3.7FY16E 9,128 16.1 1383 15.2 611 33.4 6.7 26.6 22.4 6.5 2.9FY17E 10,285 12.7 1638 15.9 738 20.8 8.1 27.1 24.1 5.3 2.3

Source: Company, Centrum Research Estimate

13.014.3 14.5

13.2

11.5

0

4

8

12

16

Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14

22.4

22.9

21.9

21.1

23.3

20

21

22

23

24

Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14

Healthcare BuyResult Update 26 May 2014

INDIA

Indraprastha Medical Corp.


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2Indraprastha Medical Corp.

Other developments

The constant fee for FY14 was 25.7% of revenues. This is likely to come down to 25.6% in FY15,25.4% in FY16 and 25.2% in FY17. Consultant fees depend on patient composition, indoor andoutdoor patients and high value surgeries performed at the hospitals. This is shown in thefollowing chart:

Exhibit 1: Consultant fees


We expect 16.0% CAGR in revenues, 23.3% CAGR in EBIDTA and 31.2% CAGR in net profit for IMCLfor FY14-FY16. These figures are better than that of its competitors.

The next hearing of the Supreme Court case for the PIL filed against the company is scheduled forOctober14.

Earnings Revision

We have revised our FY15 and FY16 EPS estimates downwards by 12% and 9% respectively. At theCMP of Rs43, the stock trades at 8.4x FY15E EPS of Rs5.0 and 6.3x FY16E EPS of Rs6.7 and 5.2x FY17EEPS of Rs8.1. Our target price of Rs54 is based on 8x FY16E EPS of Rs6.7 with an upside of 26.3% overCMP. Key risks to our assumptions include slowdown in the healthcare segment and increasedcompetition from the large players.

Exhibit 2: Earning revision

ParticularsFY15E FY16E

Current Earlier Chg(%) Current Earlier Chg(%)

Sales 7,865 8,030 (2.1) 9,128 9,328 (2.1)

EBIDTA 1,114 1,207 (7.7) 1,383 1,481 (6.6)

EBIDTA margin (%) 14.2 15.0 (80)bps 15.2 15.9 (70)bps

Net profit 458 518 (11.6) 611 670 (8.8)



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Valuation & key risks

Exhibit 3: Sensitivity AnalysisSensitivity to key variables FY15E % change % impact on EBITDA % impact on EPS

Sales 1 7.1 17.2Material cost 1 (1.5) (3.7)

Source: Company, Centrum Research Estimates

Exhibit 4: 1 year forward EV/EBITDA chart Exhibit 5: 1 year forward P/E chart

Source: Bloomberg, Company, Centrum Research Estimates Source: Bloomberg, Company, Centrum Research Estimates

Exhibit 6: Comparative Valuations

Sector Mkt Cap(Rs mn)CAGR FY14-FY16E (%) EBITDA Margin (%) PE (x) EV/EBITDA (x) RoE (%) Div Yield (%)

Rev. EBITDA PAT FY14A/E FY15E FY16E FY14A/E FY15E FY16E FY14A/E FY15E FY16E FY14A/E FY15E FY16E FY14A/E FY15E FY16E

IndraprasthaMedical 3,942 16.0 23.3 31.2 13.4 14.2 15.2 11.1 8.6 6.5 4.7 3.7 2.9 19.8 23.0 26.6 4.2 4.7 5.1

Apollo Hospitals 127,571 18.6 11.9 15.8 15.8 15.9 16.0 37.1 30.8 25.1 19.5 16.5 13.8 11.8 13.0 14.3 0.7 0.7 0.9

Fortis Healthcare 52,295 4.8 (8.6) (75.3) 5.7 6.5 8.5 (385.9) 116.4 39.0 29.8 26.8 17.5 (0.8) 0.6 2.8 - - -

Source: Company, Centrum Research Prices as on 23rd

May14

2

4

6

8

10

M a y - 0

8

N o - 0

8

M a y - 0

9

N o - 0

9

M a y - 1

0

N o - 1

0

M a y - 1

1

N o - 1

1

M a y - 1

2

N o - 1

2

M a y - 1

3

N o - 1

3

M a y - 1

4

EV/EBITDA MeanMean + Std Dev Mean - Std Dev

6

8

10

12

14

M a y - 0

8

N o v - 0 8

M a y - 0

9

N o v - 0 9

M a y - 1

0

N o v - 1 0

M a y - 1

1

N o v - 1 1

M a y - 1

2

N o v - 1 2

M a y - 1

3

N o v - 1 3

M a y - 1

4

P/E Mean

Mean + Std Dev Mean - Std Dev


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Quarterly financials, Operating Metrics and Key Performance Indicators

Exhibit 7: Quarterly FinancialsPARTICULARS (Rs mn) Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14

P & L Total Revenues 1,484 1,516 1,500 1,567 1,656 1,773 1,677 1,671

Material cost 372 364 337 351 379 388 354 389Personnel expenses 287 314 332 333 325 381 371 341Consultancy fees to doctors 403 398 396 392 422 453 436 430Other expenses 230 246 240 288 292 293 295 318 Total Expenses 1,293 1,321 1,305 1,363 1,418 1,515 1,456 1,478EBIDTA 191 195 196 204 237 257 221 193Other income 5 1 1 9 1 1 1 8PBDIT 196 196 196 212 238 258 222 201Depreciation 58 63 69 69 70 71 71 70Interest 15 17 29 25 25 23 26 22Profit before tax 123 115 99 118 144 164 125 109 Tax provision 42 38 34 53 48 55 47 38Net profit 81 77 65 65 96 109 78 72Growth (%)Revenues 17.6 17.4 16.0 14.4 11.6 16.9 11.8 6.6EBIDTA 13.7 14.2 32.4 12.4 24.1 31.8 12.9 (5.3)Net profit 15.7 9.7 18.5 (13.7) 18.4 41.4 20.1 10.5Margin (%)EBIDTA 12.9 12.9 13.0 13.0 14.3 14.5 13.2 11.5Profit before tax 8.3 7.6 6.6 7.5 8.7 9.2 7.4 6.5Net margin 5.5 5.1 4.3 4.1 5.8 6.1 4.6 4.3


Exhibit 8: Key performance indicatorsKey performance indicator FY13 FY14 FY15E FY16E FY17E

Sales Growth % 16.3 11.7 16.1 16.1 12.7Consultantation fees % 26.2 25.7 25.6 25.4 25.2Material cost % 23.4 22.3 21.9 21.4 21.1

Source: Centrum Research Estimates


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Appendix A

Disclaimer

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7I d th M di l C

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indraprastha medical - q4fy14 result update - centrum 26052014

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