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Hurricanes impacted Cayman
A couple of hurricanes led to loss of 7-10 days in 2QFY25. Also, focus was on getting approvals for the new Camana Bay hospital. The company expects a pick-up in sales in 3QFY25.
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Summary of the interview
Cayman Business Impact
Ramp-up Costs & Disruptions : Initial costs and hurricane disruptions impacted Cayman’s performance. Full operations, including inpatient services, are expected to start by Q3 FY25.
Capex Completion : Most of the Cayman investment is complete.
Margins and Revenue Mix
Margins Decline: Margins dipped due to reduced international patient inflow, particularly from Bangladesh, shifting focus to domestic volume.
Revenue Mix: International patients fell from 9% to 6%; a gradual shift to domestic reliance is underway.
Insurance and Clinics
Insurance Spending : ₹33 crores per quarter goes to insurance and clinics. Expansions are planned with more staffing and facilities.
Debt and Expansion Strategy
Net Debt : Debt is around ₹2,700 crores, with ₹1400-1500 crores annual capex planned over the next three years.
Inorganic Growth: Focus remains on organic expansion due to high costs of acquisitions.
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correction: ~1450 crores of capex.
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It appears like the current valuations are really keeping the stock in check. If not, with the kind of numbers we’ve been seeing over the last few quarters… stock should be in the downhill.
Disc: Invested and will be investing in SIP mode
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Company plans to merge it’s subsidiary.
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Currently NH is under capex phase. Q4 should give more visibility and if you look at hospital sector chart its near ATH so it remains a defensive sector where you can feel safe atleast for now.
And point when everything falls into place is around Q4. NH is reasonable in the sense it has good brand value and Delhi capex has not been the best for them as its Greenfield in a different city. But as the need increases the Delhi chapter should benefit too.
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Narayana Hrudayalaya Limited (NHL) Q2 FY25 Earnings Call Summary
This document summarizes the key points discussed during the NHL Q2 FY25 earnings call held on November 5, 2024.
Cayman Islands Expansion
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The outpatient facility of the new Camana Bay hospital in the Cayman Islands was commissioned a week before the earnings call.12 The entire hospital is expected to be operational within the next four weeks.
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Management is optimistic about cost control for the new facility and revised its estimate for margin dilution from 6-8 quarters to 4-5 quarters. They are seeing positive reviews for the outpatient facility and a lot of interest from potential patients.
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The majority of the capital outlay in Cayman is now complete.5 While there is a significant cash balance in Cayman, it is largely offset by the outstanding debt used to finance the new hospital. Management is considering all options for this surplus cash, including repatriation to India or investment in other markets.
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The inpatient numbers in Cayman were down year-over-year.8 This was attributed to several factors, including team focus on commissioning the new hospital, compliance obligations, hurricanes, and a general slow quarter. However, management is confident that things are back on a positive trajectory.
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The Cayman facility is expected to see growth in the coming quarters as the new hospital becomes operational and the old hospital returns to its previous growth trajectory.
India Business
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The new hospital cluster in India (Mumbai, Dharamshila, and Gurugram) performed well this quarter, with revenue growing 13% year-on-year to ₹130 crores and EBITDA of around 11%. The Mumbai hospital showed positive EBITDA of around 1.5%, while Gurugram achieved high single-digit EBITDA.
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Management expects the new hospitals to achieve normalized performance soon.
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NHL will prioritize its confirmed greenfield projects in Kolkata and Bangalore, totaling around 700 beds, and the brownfield expansion in Raipur with 150 beds, which are expected to be completed in the next 3-3.5 years. They are also working on closing 1-2 more greenfield projects and aim to add around 1500 beds in the next four years.
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The company has seen a decline in international patients, primarily from Bangladesh, due to factors like visa restrictions and economic issues. This decline has been offset by growth in domestic patients.
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NHL’s ARPP in India has shown healthy growth due to several factors, including a shift toward domestic patients, an increase in complex procedures with higher realizations, and a moderation of certain poor payor profiles.
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Management does not expect a significant contribution from its SaaS platforms, ATHMA and Medha, in the next 2-3 years. Currently, the focus is on increasing adoption and improving the product.
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The integrated care and insurance businesses (NHIC and NHIL) are expected to continue to see similar cash burn rates in the near future.
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The company does not have any immediate plans for a QIP.28 They believe the current market valuation does not reflect the company’s potential and have sufficient leverage and internal cash flows to fund their expansion plans.
Overall Growth Strategy
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NHL is actively pursuing acquisition opportunities but has found valuations for private equity-backed assets to be high. They are also exploring asset-light acquisitions and O&M opportunities, both in India and overseas.
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While greenfield projects are the current focus, NHL is open to acquisitions that meet their criteria for location, synergy, and price.
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The company is focused on increasing efficiency and optimizing existing operations to drive growth in the near term.
Other Points
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Management acknowledged the challenges faced by the healthcare industry in India, including high costs, long gestation periods, and dependence on unreliable payers.
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They highlighted the need for industry-wide growth in payment systems, particularly health insurance, to support further expansion.
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NHL is investing in advanced technologies, such as robotic surgery and immune therapy, to stay at the cutting edge of healthcare.
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New hospitals will be built with a focus on digitization, efficiency, and flexibility to adapt to future needs.
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The company is exploring mental healthcare as part of its integrated care offering but does not plan to offer it as a standalone service.
Disclaimer - This is AI generated concall summary.
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I am holding this stock for an year now. I fail to see how other smallcap hospital stocks have rallied 2x in the time, while having same or worse financial metrics, growth etc. as compared to Narayana Health.
Those companies also ran up along with NH since 2021, but NH seems to be lagging since the past year. Is it due to Kiran Shaw (Founder of Biocon) being an investor in this company? \s
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A famous person being an investor should not have any material impact on share price on the long term.
The recent past few quarters are showing muted growth due to capacity limits in existing hospitals so increased ARPOB is driving some single digit growth (Occupancy is already ~70% levels). Cayman has undergone a major capex with a new hospital that will take a few years to break even. 2 new greenfield hospitals; though in Kolkata and Bangalore itself but it is new location, new building from scratch; are under capex phase so bottomline will see some margin pressure. So, some margin pressure and single digit topline growth for a company that was previously doing 20% levels is the reason for the stagnation. 2 years from now once these new hospitals start earning revenue, NH would be looking very well placed.
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Does anyone of you have an idea of what is the Occupancy ratio and the EBIDTA of individual regions ( Bangalore,Kolkata and rest of the regions).
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Da vinci makes the cut in the start of the interview - robotic surgery
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A month ago, I visited Narayana Hrudalaya in Bengaluru, and it was quite crowded. From the video, it appears that people have strong faith in NH.
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All hospitals today use Da vinci robotic . Nothing new here.
We need to wait for the capex to shape up.
Also regarding NH , i stay in bangalore. There is no doubt about doctors here. Same case with Manipal, Aster ,Sagar hospital,Fortis in Bangalore.
All have exact same robotic system , zero difference.
What matters in investment here is financial numbers. How sales, revenues , PAT will grow in future.
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True. One of my known surgeons in Apollo has been using robots in surgery for quite sometimes.
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Lol many hospitals have davinci - nothing to boast about. But still a notable thing coz of the name da vinci has made. Also, don’t think every hospital has onboarded this one so ticks a check box.
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