Jupiter life line hospital- fairly valued

[RahulSingh]

Compnay Background:-

Jupiter started its first hospital in Thane in the Mumbai Metropolitan Region that is MMR in 2007, the second one was in Pune in 2017 and the third in Indore in late 2020. This is a 96 plus percent subsidiary. Thane and Pune hospitals are both around 375 beds each and were Greenfield projects, while the Indore Hospital was an acquisition that is planned for about 430 beds, but we are currently operating around 231. All our hospitals are full service independent hub hospitals, where we provide all services from childbirth and newborn care to cancer and organ transplantation services. As we speak, we are constructing a 500 bed hospital in Dombivli, which is also in MMR. The land is purchased, all permissions for construction received, the excavation is now complete and we have begun constructing upwards. The project is likely to be operational anywhere between 2 to 3 years from now. The construction is currently in full swing and working as per our scheduled time.

As the stated objective of the IPO, Company mentioned last time, Company have
repaid all our debt obligations and now got annualized finance savings of over Rs. 40 crores. In the previous quarter, Company also completed empanelment with the insurance companies in Indore, and consequently, Company occupancy has increased from 51.2% in the last quarter to 56.2% in Q3 FY24. The contract renegotiations with insurance companies at the Pune Hospital are also concluded and it has been one of the factors that has helped to increase the ARPOBs from ~49,000 in Q2 24 to 53,400 in Q3 FY24.

Personally I have been to their Thane hospital for my mom cardial test, Although charges were slighlty higher but the experinace I had was worth it. From Reception intraction to test. Mom was very well taken care of and my billing experiance was great.
Hospital was very clean and seems luxuries. Overall it was wow experiance for me. Since then i have been following this stock. I visited in Dec 2023.

Industrly Background:-

Jupiter life line hospital Q3 update:- Company has posted its highest profit this qtr, partly due to its repayment of debt. Company is walking the talk they said IPO funds will be used to repay its debt and they have done this. Company operate independently on
owned land.The proportion of the Indian population of 60 years or more is expected to rise to 12.5% by 2026 from nearly 8% in 2011

FY24 Nine Months period update : -Fo**r the nine months period, the total income has been Rs. 782.1 crore, 19.8% growth. The EBITDA for nine months is Rs. 178.9 crores, that is a 17.6% increase Y-o-Y. And the EBITDA margin is 22.9%. The PAT for nine months is Rs 131.3 crores. The average occupancy for these 9 months has been 63.2% compared to 60.6% in the previous year same period. ARPOB for 9 months FY24 is Rs 53,585 and the ALOS is 3.92 for these 9 months.

Capex Update:- Company is doing a capex in Dombivali east for 500 beds. Kalyan dombivali region comes under smart city plan of central goverment. Project is very near to Lodha palava city and proposed metro line. Many residensial real estate plans are about to be completed.

Above image shows 2 senarios

Senario 1 - Project completed in FY 2026. Considering 20% growth annualy on existing hospitals and adding 100cr qtrly revenue in top line. (100cr calculation as below 500 beds - 50% occupency - 50000ARR) . With net profit % at 18% 2026 profit would be 483cr and 2027 638cr while taking 50 multiples I have come to a target market cap.

Senario 2 - Project compeltion in FY 2027. Considering 20% growth annualy on existing hospitals and adding 100cr qtrly revenue in top line in FY 2027. with Annual profit of 336cr and multiple of 50 market cap would be 17000cr

Risk and threats

1. Delay in dombivali project compelation
2. Growth of less than 20% in top line
3. Reduction in Net profit %
4. Company borrow heavely from External market which reduces its NP

With above very optimist senario and after seeing this above CAGR return compnay seems fairly valued at this price.

Please provide your feedback any feedback will help. Just let me know if you have liked it or dont liked it. where did I went wrong what i have not embeded in this calculation.
Is this right way to analysis company or should I change the way?

[luckbychance]

You’re assuming no increase in margins? That’s unlikely. Also how can CAGR be negative if there is growth anyways? Something seems off. Not following Jupiter, but invested in Yatharth so following the space closely.

[RahulSingh]

Hi Ravi,

Thanks for commenting.

Jupiter is currently 70 PE and with a market cap of Rs 9700 Cr.

Assuming net profit margin more than 15% would be to much optimistic outlook. Narayan hyudaya has 15%, Max has 20% and apollo has 4% net profit margin. so 15% expectation is itself on higher side.

CAGR coming negative because I am not valuing year 2026 and 2027 at 70 PE droping PE at industry level which is 50. so PE valuation is dropping price by 30%.
In Future, rise in share price will have to be totally on earning basis, not from PE expansion. Hence giving multiple of more than 50 is very risky.

[RahulSingh]

Update- 23-Feb-2024

Company update.

The company has acquired land in Bibvewadi, Pune, with an area of ~11,500 Sq. Meter, on a leased basis. The period for lease is 10 years with an annual lease rental of Rs.9.27 Crores. Further, the company will have the option to purchase the land after three years. The land is leased for setting up a hospital.

Company seems to be more focus on western side of India. Although company has not given any guidance about capacity addition. Overall its a good news and would definetly add value in coming years.

[RahulSingh]

Supreme court has asked to central govt to set standard rates card for healthcare procedures.

Currently Pvt hospital charges more based on their investments in technology, docters quality and complexicity of cases.Jupiter current has following mix

Self payers- 45.3%
Insurance- 53.4%
Gvt Scheme- 1.3%

ARPOB for FY 2023 was Rs 50,990

[Saptarshi_Chatterjee]

P/E re rated to 60. margins slightly improved. goldman sachs increased their holdings. and September quarter posted around 23% increase in net earning . how is the future outlook looking? should one invest in the Co with slight portions of the PF??

[ha_the_meow]

Results are out, net profit percentage has dropped considerably

[ha_the_meow]

From their investor’s ppt -

• Higher depreciation arising from the addition of newer beds / Facility Expansion, and also includes depreciation on the Right to use assets
• Increase in finance costs on account of the overall increase in gross debt for the ongoing capex plan and Interest cost of right-to-use asset for leasehold land.
• Also their yearly pat is relatively low because of exceptional reduced taxes previous year
• I would like someone to comment upon their topline growth, it seems OK considering they only do greenfield expansions
  
  

[RahulSingh]

I done some study with help of AI and still its fairly valued. falls unders companies which gives 10 to 18 consistent growth.

Projected Bed Capacity, ARPOB, Revenue, Profitability, and Share Valuation (Consolidated)

Financial Year	Operational Beds (Start of FY)	Bed Additions During FY	Total Operational Beds (End of FY)	Projected ARPOB (₹)	Projected Revenue from Operations (₹ Crore)	Average Occupancy (%)	Net Profit Margin (%)	Net Profit (₹ Crore)	EPS (₹)	Projected Share Price (PE 40) (₹)
FY 2024-25	961	100	1,061	60,600	1,261.50	65.3%	14.0%	176.61	26.94	1,077.60
FY 2025-26	1,061	0	1,061	66,660	1,387.65	65.3%	16.0%	222.02	33.86	1,354.40
FY 2026-27	1,061	210 (Dombivli Ph-1)	1,271	73,326	1,526.42	62.0%	16.0%	244.23	37.25	1,490.00
FY 2027-28	1,271	210 (Pune II Ph-1)	1,481	80,658.60	1,679.06	60.0%	16.0%	268.65	40.97	1,638.80
FY 2028-29	1,481	991 (Ph-2 for Dombivli & Pune II, Full Mira-Bhayandar, Indore Ph-2)	2,472	88,724.46	1,846.97	60.0%	18.0%	332.45	50.70	2,028.00

Key Assumptions and Notes for the Projections:

Projected Share Price (PE 40): This is calculated by multiplying the EPS by a Price-to-Earnings (PE) ratio of 40, as per your instruction.

Future Bed Capacity and Additions:

◦FY 2025-26: No major new hospital capacity additions are projected in the provided sources for this year beyond what was integrated during FY252122.

◦FY 2026-27: Phase 1 of the Dombivli multi-speciality hospital (projected 210 beds, based on the 200-220 range in sources) is expected to be commissioned by Q1 FY2722… Construction for Dombivli began in April 20231.

◦FY 2027-28: Phase 1 of the new 500-bed tertiary care hospital in Pune II (Bibwewadi), adding a projected 210 beds (based on the 200-220 range), is expected to be commissioned in FY28 (Calendar Year 2028)22… Excavation work has commenced, and construction is expected to begin after the monsoon in 20254…

◦FY 2028-29 (Full Completion by Q4 FY29): This year projects the commissioning of the remaining phases to align with the company’s stated goal of establishing a network of approximately 2,500 beds1… This includes:

Dombivli Phase 2 (additional 290 beds, based on the 280-300 range, as total Dombivli capacity is 500 beds2225).

Pune II Phase 2 (additional 290 beds, based on the 280-300 range, as total Pune II capacity is 500 beds2225).

Mira-Bhayandar (full 300 beds) is expected to be operational by CY29, implying a significant contribution by the end of FY2922… JLHL acquired approximately 2 acres of land in Mira-Bhayandar for this 300-bed hospital24…

Indore Phase 2 (additional 111 beds)2122. This expansion is planned once the current occupancy reaches 60-65%

Average Occupancy (%): A slight decline in overall average occupancy is projected for FY 2026-27 and FY 2027-28 (to 62.0% and 60.0% respectively), and maintained at 60.0% for FY 2028-29. This accounts for the initial dilution effect when new hospitals begin operations, as new facilities typically have lower occupancy rates during their ramp-up phase.

Projected Revenue from Operations Growth: For consistency with the methodology of previous tables, an implicit 10% revenue growth year-on-year is applied from the actual FY25 revenue onwards.

Projected ARPOB Growth: For subsequent years, a 10% annual increase is applied. While Dr. Ankit Thakker noted that a sustained 10% ARPOB growth is not anticipated across all hospitals, expecting it to be “inflation-linked” for mature hospitals (Thane and Pune) and slightly higher for Indore for another year, this projection adheres to the 10% growth rate as implied by previous instructions for table consistency