Results look great but I would be better to have more communication from management for example on the contribution from the new 200 bed maternity care unit. For now this is what we know from their investor presentation “Further, we are happy to announce the operationalization of its new facility of an additional 200 beds focused on providing Mother and Child Care services from January 29, 2024.”
This means we should have had 2 months of performance from this unit being included in FY2024 results.
Disc: Invested in 2024
Central bus stand going to move away from KMCSH. Chances are more on real estate price stagnation and drop in number of patients. I reduced my potion in KMCSH and increased in kovai medicals(at lower levels).
They have 2 facilities in Trichy: the original hospital and the new super-specialty pediatric facility. The revenue potential from the older facility seems to be capped, any revenue growth is likely to be tied to the pediatric hospital and expansion efforts, if any, within the listed entity.
Management’s focus, however, seems to be primarily on Sri Kauvery Medical Care (India) Limited, the non-listed entity. This entity already operates a network of 10+ hospitals with significant capacities and has plans to add 12-15 facilities. Most of the management attention is directed at the non-listed entity.
From a valuation standpoint, KMC Speciality Hospitals is fairly valued when looking at the EV/EBITDA ratio. In contrast Kovai Medical Centre & Hospital presents a stronger valuation by comparison. The major growth drivers for KMC Speciality Hospitals would likely be an increase in its hospital network within the listed entity or, as a less probable option, a reverse merger with the non-listed Sri Kauvery Medical Care. Given the actual ownership structure of the non-listed entity, which has significant political stakeholders, such a reverse merger seems unlikely.
I wonder what metrics makes someone to buy/hold KMC speciality hospital over kovai medicals or apollo.
Promoter of KMCSHIL has plan to list the parent company separately.
Great point on the Kovai vs KMC choice… I am really thinking through this. The minimal communication from them (KMC) is not helping their case either.
Disclosure: invested minimally for tracking
I was also going through it, and I had doubts about following:
And after going through their annual report (KMC), I saw that Sri Kauvery Medical Care Ltd. The owner of KMC Hospital (75%), also has 4 or 5 other hospitals (100% owned, and not included in KMC). However, one more company they own 51% is for distribution of medicine Custer something, whatever. So there are relatives transactions between parent company and KMC. KMC and that medicine distributor and KMC and other private hospitals from the parent.
Fix assets increased from 74 in 2021 to 238 now.
If we look at history, peak net fixed asset turnover has been 2.4 and lowest 1.8 ( ignoring 1.4)
which means, it can do peak sales of Rs 523 cr ( taking 2.2 conservatively say achievable in 3 years thats how usually hospitals scale) and at lowest 428 cr ( taking 1.8).
If we look at peak net profit margins has been 17.65 % and lowest 9 ( ignoring 6.98)
which means, it can do peak profit of Rs 88.9 cr ( taking 17% conservatively ) and at lowest 55.64 cr ( taking 13) not taking low as it is scaling margins are to be higher than previous
If we look at historic PE it stayed between 35-60 and 10Yrs average PE 40 ( except some time in CY19-20)
so peak and lowest marketcap in 3Yrs can be between :
Lowest margin(13%), Lowest PE (35), Lowest Asset turnover(1.8) ;- 55.6435= 1947Cr that is a 23% CAGR in 3Y
Lowest margin(13%), 10Y AVG PE (40), Lowest Asset turnover(1.8) ;- 55.6440= 2225Cr that is a 29% CAGR in 3Y
High margin(17%), 10Y AVG PE (40), high Asset turnover(2.2) ;- 88*40= 3520Cr that is a 50% CAGR in 3Y
Positives: Currently Occupancy is 69% it’s bound to increase in future, ARPOB is increasing
Risks:- In stage 4 currently, Debt increased significantly, other hospital related risks
Disclaimer:- holding, biased, new to investing, added recently also.
