Good results from Kovai. Bottomline up almost 35% yoy. LT borrowings have reduced from 120Cr to 100Cr.
Good results from Kovai. Bottomline up almost 35% yoy. LT borrowings have reduced from 120Cr to 100Cr.
I think the TOTAL bed capacity as of 2015 is 1000 beds and it is adding 300 in Chennai but construction of that hospital will start in 2017-18 so it will be a while before those 300 beds are available. Also it was planned in 2013 but the construction has yet started so there could be further delays.
Here the notes I collected from various annual reports
Cost of setting up a new hospital is approximately 1 Cr per bed. going by that, KMCH can be valued at 1000 Cr based on its 1000 bed capacity. Trading just above that now. Looks fairly valued.
In comparison Apollo has approximately 9,215 beds and trading at a market cap of 17,000 Cr giving a valuation of 1.9 Cr per bed although its hospitals are in metros and it also has a pharmacy business.
Indraprastha Medical has a bed capacity of 715 beds and trading at 516 Cr giving a valuation of 0.7 Cr per bed.
Good set of numbers:
Q4 sales up 9%, net profit up 27%
YOY sales up 12% net profit up 48%
long term debt down to 85cr from 120cr
Dividend of 2.5rs/-
KMCH has filed for an environment clearance for expansion of its main Center from 500 beds to 1650 beds at a cost of only 70 Cr. @lustkills and @ananth, I will appreciate your views on this. Since there is no public announcement of this expansion, Is it normal for companies to obtain EC well in advance? Is the medical industry around Kovai area large enough to support a 3 fold rise in capacity?
SEAC has approved the proposal for grant of EC on March 31 2017. This is in addition to proposed 300 bed hospital in Chennai. Construction of the Chennai hospital was suppose to start in 2016-17.
Thanks for getting the EC report. As per my understanding, Kovai is well reputed hospital in Coimbatore and located in the center of the city. IMO, it can easily take that increase in the bed.
Spending ONLY 70cr for expanding 1150 beds is mindblowing. My understanding it may take roughly around 1cr per bed for construction etc. Here it works out 0.07cr which looks too less. So I’am suspecting that cost estimate in the report.
Majority of the built area seems to go towards medical college (rather than hospital) Economics of running medical college will be lot different then running a hospital. We need to understand the rationale for constructing the medical college from the management (may be at the AGM).
I noticed that too. In fact, as the area table in the report, existing 500 beds take up 24k sq. mt area and new 1150 beds take up only 7k sq. mt area. Something does not add up.
Medical college is to create supply of doctors to the hospital but that investment has a long gestation period as it will take years for a student to turn into an experienced doctor.
May be 0.07cr per bed is only construction cost without any medical infrastructure.
Looking at the comments I had a doubt , since this is a EC report they will always prefer to overshoot with the requirements to avoid going for a EC clearance again.
Also they seem to require higher clearance for water and waste disposal approval which is shown against the increase in patient beds. The increase in beds might be marginal in short term and rest approval taken in advance for future provision.
Thanks for sharing the report and insights.
Couple of comments - 1. I think Kovai already has more than 800 beds 2. The last expansion done was already towards Cancer block 3. Last time I visited, they already had a full fledged canteen etc. So unable to reconcile the things as mentioned in the report.
At the same time, this may be like a broad approval for some specific area and it gives the confidence that the potential is there to grow. As per my understanding, the company has enough land to go upto 2000 beds if needed. And Coimbatore has been a medical hub in South and continues to attract lots of patients.
There is a recent interview of MD - https://youtu.be/Vfaknm9wKGM. Can anyone translate?
Mostly about the MD’s background and some history of the company.
Few take aways
*Company seriously considering medical college( before corporate cannot start educational institutions)
*He believes only around 15% of population can afford the private hospital service also he feels no private hospital should exist(government jobs)
*Difficult to get the cost down because of the imported equipment. Its corporate so we work to make shareholder happy
*26% of population are diabetics and another 40% will get soon. BP and heart related are most common in the recent past.
Some controversial questions about hospital fees etc for channel TRP.
[1:06AM, 7/11/2017] Vivek Gautam: https://www.youtube.com/watch?v=Vfaknm9wKGM&feature=youtu.be
[1:06AM, 7/11/2017] Vivek Gautam: 1. Rooms are like 5 star hotel- says that all other hospitals stink and poor quality – says hospital is a place of living and should have all comforts
Started Kovai because he studied in USA and liked hospitals there- wanted to do the same in India
Has a restaurant and shop inside KMC- it is like a mall
Feels that Central Govt should not interfere in health – it is solely responsibility of state govt. is strongly against Central interference.
His trust has various schools and college- all are nonprofit. This was his response when asked why KMC cannot start a medical school. One needs to separate business and charity
Says that it is absolute responsibility of doctors to save patients. Accepts all emergencies and start treatment. They will collect advance only after basic first aid is done
India has most number of private hospitals – because govt. is irresponsible and no of stat hospitals are less
He says KMC is a corporate hospital – does not cater to common man- only very effluent and rich people can afford
He gives 5-10crores concession to the poor in his hospital – feels that he cant give more because of shareholders
All equipment are imported- have a life of 5 years. Have to be changed after that
Really disappointed with state of hospitals in Inda- gave example of hospital in Coimbatore
His envision for India is a country without any private hospital
Kovai valuations have caught up with fundamentals. From here on it will a 15-20% growth story. This is a good company but not a high growth story.
A single hospital in a single city cannot grow more than 15% in a year. Their only advantage is there is no other super specialty hospital in 150 km radius of Kovai.
Having said that, their revenue is about 15k per bed per day which is much lower than other super specialty hospitals which generate a revenue of 35-45k per bed per day. I think only part of the KMCH beds are super specialty, rest are primary care.
Promoter stopped buying shares once promoter shareholding reached 50%. Promoter was buying to get a controlling interest in the company.
Promoter is deleveraging and getting d/e to a low level so in case business gets into trouble, his next generation will not lose control of the business to creditors.
Chennai hospital is still on drawing board. We will know more about it in AGM next month. I think it will not start until deleveraging is done.
Recent EC report on expansion is confusing to say the least. Numbers don’t add up on capacities and areas and costs. I think this EC is just for getting higher limits of water and other requirements and a not a real expansion plan.
Overall, a good business but only an average investment at these levels.
They charge almost 30% less ( compared to Chennai/Bengaluru) even for complex surgeries like liver transplant.
KMCH is well established complete multispeciality hospital at Kovai. There are few single speciality hospitals at Kovai. Competition seems to be coming from new multispeciality hospital called royal care hospital started by group of doctors who use to work at KMCH.They seem to be doing good and have plan to reach significant bed strength. They may take some market share from KMCH. But it’s almost impossible to significantly impact the well established hospital like KMCH by new multispeciality hospital RCH-Brochure.pdf (467.9 KB)
KMCH already has 750 to 800 beds . My guess is they are obtaining permission for the already expanded beds +future expansion.
They are suppose to have separate hospital for medical college and provide treatment for poor patients/lesser charge. As per friend they already have building for medical college(not very confirmatory). I have recently sold my holdings . Not comfortable with management plan of starting medical college.They already have DNB courses in various specialities which provide them enough trainees to work.
Kovai’s 2016-17 AR is as usual short on details and long on general industry gyan. They have also scrapped Chennai Hospital plan and now planning on building a medical college at a cost of whopping 500 cr.
Is there any way we could more details for their expansion. How are they going to fund such huge amount?
Is there any con call happening?
Dis: Not Invested, evaluating the stock.
KOVAI AR - especially the section on threats is quite amusing. listing Electronic Underwear Preventing Bedsores as a threat to their business - is a piece of gem. Here is an extract
Equity Investing as a full time career?
Something wrong here. Factors mentioned as threats to business are actually not.
I have penned down my understanding of Indian Healthcare Services Industry and it’s Business Economics as first post on my new blog Rational Side of Pendulum. I wanted to share so that anyone interested in Healthcare Delivery business can benefit from it. Please click here. I am looking forward to any questions/comments.
Disc: not holding Kovai.
I am visiting this hospital from early 90s(as soon as it started and its near to my home) and have a people whom i know working here for long.From early days of being an affordable private hospital catering to the lower middle class/middle class population,it has now evolved into a super specialty corporate hospital .
Recently most of my relatives and friends who used to visit this hospital have started to visit the newly started Royal care Hospital and the reason i am getting is many of the renowned doctors in Coimbatore have moved to this hospital.I have not done a detailed scuttle butt as i am not invested but investors could have a look on it