Stock To Buy: Revenue Grows 37% YoY, Target Price Upgraded For The Stock of KIIMS, Says Leading Brokerage

Leading brokerage firm Prabhudas Lilladher has given a buy rating to the stock of Krishna Institute of Medical Sciences (KIIMS). The midcap healthcare services stock's revenue grew by 37% YoY to Rs. 5.6bn, while occupancy increased at 72.6% at the company level, vs 65.5% in Q1.

Stock To Buy: Target Price

The Current Market Price (CMP) of Krishna Institute of Medical Sciences is around Rs. 1,550. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 1660. This stock has the potential to give a 7.09% return, in the upcoming 12 months. This mid-cap stock has a market capitalization of Rs. 12,389 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1,550
97Target Price	Rs. 1660
Potential Upside	7.09%
52-week high share price	Rs. 1,668.40
52-week low share price	Rs. 1,113.25

 

Quarterly earnings

KIIMS Q2 operating performance was broadly in-line with EBITDA growth of 22% QoQ to Rs1.6bn adjusted for one-off expenses (Rs. 150mn) and rental. The company's robust cost control, low capital intensive set-up and value accretive acquisitions have ensured good profitability in past with EBITDA growth of 40% CAGR over FY18-22. Consolidated OPM was at 27%; Ex. Sunshine, margins were at 30.5% vs 29% in Q1. Ex. Sunshine occupancy was at 75% vs 71% in Q1FY23. Sunshine occupancy was at 42.6%. Consol. ARBOB came in at Rs. 29, 237/ day; down 3% QoQ due to case mix and seasonality effect.

Expansion plan & capex

KIMS added +900 beds across Telangana and Nagpur region in H1FY23. Kondapur's expansion plan is on track with capex of Rs. 3.5bn largely spend towards medical equipment over 3 years. KIMS completed mall acquisition in Karnataka (Bangalore) to build 400 beds capacity hospital; out of which 200 beds would get commercialized in 18 months. KIMS incurred an initial expense of Rs. 1.2bn and plans for an additional expense upwards of Rs.2bn over 18 months.

Stock Valuation

"Also recent acquisitions of Sunshine, Nashik and Nagpur are value accretive which will continue to aid growth momentum, in our view. We expect 17% EBITDA CAGR over FY22-25E with best in class return ratios of 22%/28% RoE/RoCE. Our estimates broadly remain unchanged. We maintain our 'Buy' rating with revised target price of Rs. 1,660/share (Rs. 1550 earlier), as we roll forward based on 20x Sept 2024E EV/EBITDA. At Current Market Price (CMP), stock is trading at valuations of 19x EV/EBITDA and 30x P/E on FY24E," the brokerage firm mentioned.

OPM to improve from current level

Sunshine's OPM to improve from current level of 18% to 25% in next 12 months as occupancy improves across units. Mgmt sees Sunshine units to merge with parent over a period of time. Nagpur unit OPM to improve to 20-25% (Currently at 8-10%) in next 12-18 months, as there is lot of scope to bring in operational efficiencies towards consumables and consulting expenses. The company is seeking board approval to buy out the minority interest in certain units.

Disclaimer

The above stock was picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.