This 2021 Listed Small Cap Stock Gave 26.63% Returns, Brokerage Suggests Buy For 46% Upside

Stock outlook & Returns

The stock's current market price is Rs 1262.40 apiece. The Current Market Price is Rs 262.40 above the 52 week low and Rs 302.6 below the 52 week high, respectively.

The 52-week low of the stock is Rs 1000 recorded on 11 November 2021, and the 52-week high is Rs 1565, recorded on 4 January 2022, respectively. ROE is 20.20%.

Stocks over the past week have jumped 2.22% and in the past 1 month nearly 6.34%, respectively. In the past 3 months, the share moved up by 2,57%. However, over the year, the share value has fallen 2.87%. The shares were listed on the exchange last year in June, and since then it has gained 26.63%.

TTM EPS is 13.78. TTM PE Ratio is 39.72. The P/B ratio is 7.34. It is a small cap hospital stock having a market cap of Rs 10,013.08 crore.

Taking the company's Current Market Price and the estimated target price into consideration, the stocks have the potential to gain up to 46% in the next 12 months.

Healthy performance driven by IP volume growth

Krishna Institute of Medical Sciences Ltd (excluding Sunshine) reported non-COVID revenue of Rs 386cr (up 9% YoY) on account of 8% YoY growth in IP volume and 51% YoY growth in OP volume, despite lower occupancy in Krishna Institute of Medical Sciences (excluding Sunshine) (71% in Q1FY23 vs 85% in Q1FY22). Revenue contribution from cash patients decreased to 55% (vs 64% in Q1FY22) and that from insurance patients stood at 24% (vs 23% in Q1FY22). Krishna Institute of Medical Sciences (excluding Sunshine) reported decline in ARPOB to RS 26,341 (down 3% YoY) and ARPP of RS 113,523 (down 24% YoY), mainly due to the erosion of COVID business. Furthermore, the average length of stay for Krishna Institute of Medical Sciences (excluding Sunshine) reduced to 4.31 days (vs 5.47 days in Q1FY22) as business normalised. Krishna Institute of Medical Sciences (excluding Sunshine) posted 10 bps improvement in EBITDA margin to 30.5%, higher than our estimate of 29.9%, despite the increase in employee, doctor, and power and fuel cost at existing Krishna Institute of Medical Sciences Hospitals.

Soft performance by Sunshine Hospitals

Sunshine Hospitals has become a subsidiary of Krishna Institute of Medical Sciences Hospitals, following the acquisition of 51.07% stake, effective 1st April 2022. It posted Rs 109cr in revenue, below our estimate of Rs 118cr, mainly on account of the lower occupancy level (~40%). EBITDA at Rs 19cr was largely below our estimate of Rs 31cr. EBITDA margin contracted 970 bps sequentially to 17.8%, as the hospital is focusing on hiring talent and introducing other clinical programmes to minimise dependency on orthopaedics. The management expects margins to increase to 30% over 18-24 months.

Valuation and outlook: Maintain ‘BUY' rating

Krishna Institute of Medical Sciences Ltd reported soft results in Q1FY23 despite healthy performance in non-COVID business, which was dragged by Sunshine Hospitals, which is still in the integration phase and its performance is expected to improve with the implementation of other clinical programmes besides orthopaedics.

The brokerage said, "We maintain our positive view on Krishna Institute of Medical Sciences based on its healthy expansion plan and anticipated increase in operating beds in the following years on better occupancy and continued high margins with sustained focus on operational efficiency. Krishna Institute is expanding its footprint with the acquisition of Krishna Institute of Medical Sciences Manavata Hospital in Nashik, a greenfield facility at Bangalore and addition of beds in existing facilities. Krishna Institute of Medical Sciences intends to fund its ambitious expansion plan, entailing an addition of ~1,700 beds over 36-48 months, through a mix of internal accrual and borrowing, while maintaining D/E at a restricted level. We maintain 'BUY' with a target price of Rs 1,832/share."

About - Krishna Institute of Medical Sciences Ltd

Krishna Institute of Medical Sciences "Deemed To Be University", Karad is located in Western Maharashtra, India against the background of mountains and valleys. The green, eco-friendly campus is spread over 57 acres and is well connected by rail, road & air.

The University is accredited by NAAC 'A+' grade and has been conferred with ISO 9001 : 2015 certification. The constituent faculties of the University include Medical, Dental, Physiotherapy, Nursing, Pharmacy and Biotechnology offering undergraduate and postgraduate courses in the respective faculties. It also runs Ph.D. programs and Post Doctoral Fellowships in various subjects.
The medical college is about 35 years old and is recognized by the Medical Council of India, Medical Council of Malaysia and is listed in the WHO's World Directory of Medical Schools. MBBS and postgraduate degree/diploma courses in clinical and basic sciences in 17 disciplines are recognized by Medical Council of India. It also admits the international students from all over the globe for undergraduate courses.