Why shares fell upto 10% in two days ? Any news regarding this sel off.
I assume it is happening because of latest supreme court’s order to Govt. to standardize hospital charges.
Link- SC directs Centre to standardise healthcare procedure rate: How will it impact hospitals?
Rainbow enjoys over 35% OPM. That’s a big number for a hospital.
If Govt. intervenes here, the OPM is likely to go lower.
If that happens then why should market pay 50+ PE for Rainbow.
Hence the selling.
My thoughts only.
Disc: not invested
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View on Corporate Governance
It’s encouraging to note that 4 out of 7 directors are independent, which is a positive sign for corporate governance. The BOD’s diversification and experience contribute to a well-rounded perspective. Members of the board bring diverse expertise to the table which helps to take informed decisions. Direct connection in the board, between Dr. Adarsh Kancharla (Non-executive director) is son of Dr. Ramesh Kancharla (Chairman and Managing Director). While Dr. Adarsh lacks prior experience in business & management, his inclusion in the experienced BOD raises questions about the criteria for selection. We assume that Dr. Anil Dhawan, an independent director, having an indirect association with functional directors. This could impact their independence. Overall, the BOD appears promising, but the indirect association with functional directors warrants second thought. The Board of Directors are considered experienced but on the other hand the management is new to the company due to the recent change in CFO & Group COO, with Vikas Maheshwari taking over from R. Gowrishankar, & Sanjeev Sukumaran taking over from Dr. Rohit Manipal Bhojaraj is also noteworthy. Other than this the management have all of its policies right on point. Please put some light on it if somebody has better understanding into the governance.
Discl :- Above points are my observation I might be wrong. Not an investor, looking for opportunities.
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Another disappointing quarter by Rainbow. FY24 has been the year of headwinds, Lower seasonal illness admissions, seasonal imbalance, delayed mansoon, cyclone affect in Chennai which effected the business. Managment has given guidance of ~15-18% for topline growth. management is working on to improve its brand recall in Chennai and Bangalore in coming future these clusters will be growing near to same as the Hyderabad cluster. Balance sheet to remain robust, capex will be funded by internal accruals. Announced a capex of ~50cr.
The main disappointment is around the growth in the matured hospitals. They had good amount of expansion and that was mainly in the new hospitals which is reflected in the bed count and occupancy and this is understandable as the cost is front ended in hospitals. But despite a good growth in ARPOB and some expanded capacity, the occupancy for matured hospitals dropped for various reasons.
EBITDA growth compared to revenue growth haven’t fallen off significantly and it is PAT growth that has dropped so no concern on the core business. This is mainly coming from additional depreciation due to front ended costs. A 15-18% topline growth is lower than the recent past (Last 3 years - 26%) so this signals a period of consolidation in the immediate coming quarters…?
Disc: Invested and biased. 3% of portfolio.
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Agreed, whats your future outlook on this? Considering other players in this sector are doing decent
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They have a lot of new hospitals and beds brought online in the last 2-3 quarters. The front ended costs are (potentially) hitting balance sheet and as a result bottomline looks slow growing. More greenfield expansion would result in higher front ended costs suppressing the numbers.
I would track the ARPOB and occupancy metrics for matured vs new and check the trend. I am invested and continue to stay so as I don’t see a threat to the core business of childcare as there is not much direct competition. In any case, the concall should give better subjective insights on management’s view.
Disc: Invested
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Excerpts from Q1FY25 concall:
New hospitals take between 1 year (HYD) to 2 years (BLR, MAA). And occupancy in the newer hospitals is ~27%, way below the breakeven of 35%. This is definitely a drag on the margins which should improve in coming quarters.
And more beds coming in HYD and BLR in FY25 so expect subdued margins for FY25.
Disc: Invested
3 Likes
Rainbow Children’s Hospital
Q2 FY 25 results and concall highlights -
Company’s portfolio of hospitals -
Hyderabad - 8 hospitals, 1 clinic
Bengaluru - 4 hospitals, 1 clinic
Chennai - 3 hospitals
Vijaywada - 1 hospital, 1 clinic
Vishakhapatnam - 1 hospital, 1 clinic
Delhi - 2 hospitals
Total - 19 Hospitals, 4 clinics
Doctors team @ 835 full time doctors
Bed Capacity @ 1935 beds
Q2 financial outcomes -
Revenues - 415 vs 332 cr, up 25 pc
EBIDTA - 147 vs 117 cr, up 25 pc ( margins stable @ 35.2 pc )
PAT - 79 vs 63 cr, up 25 pc
Mature Hospitals ( > 5 yrs of operations ) -
No of beds @ 1237 beds, up 4 pc YoY
Occupancy @ 68.6 vs 57.9 pc, up 18 pc YoY ( a massive jump )
ARPOB @ 51.4k vs 55.2 k, down 7 pc YoY
Newer Hospitals ( < 5 yrs of operations ) -
No of Beds @ 698 vs 468 beds , up 49 pc YoY
Occupancy @ 43.2 vs 32.9 pc, up 31 pc ( a massive jump )
ARPOB @ 44.7 vs 50.9 k, down 12 pc
Payor Mix - Cash : Insurance @ 47:53
New capacity addition pipeline -
Rajahmundry ( AP ) - 100 beds - current FY
Bengaluru ( 2 locations ) - 60 +90 beds - next FY
Coimbatore - 130 beds - next FY
Gurugram - 100 beds - FY 27
Gurugram - 300 beds - FY 28
Company’s IVF segment has attained significant growth momentum. Company expects the same to continue going forward
Company launched ‘Butterfly Essentials’ brand of products for Mothers and New Borns early in CY 24. Products like - Wet Wipes, Soft toys, Body oils, Lotions, Aloe Vera gels etc. Initially, company shall only sell these products via stores inside their existing hospitals
Company’s Rajahmundry hospital is slated to open in Mar 25
The two new hospitals in Bengaluru should go live in Q2 and Q3 FY 26
International patients currently constitute 2 pc of company’s total business
Company’s financial position remains strong with cash on books @ 580 cr as on 30 Sep. Should be able to complete all the above mentioned capex from the cash in hand and internal accruals
Company is coming up with a new Child development center at Hyderabad, spread across 8k Sq Ft. Should go live in Nov 24. Will be addressing issues like ADHD, Autism Spectrum disorders and other early childhood psychological issues. These issues have become quite common these days, hence the need of specialised care
Q1 is generally their weakest Qtr and Q2 is generally their strongest Qtr of the year. Avg EBITDA margin for H1 was 31 pc. Company believes, the can sustain such margins for the foreseeable future ( within +/- 1 pc band )
In paediatric field, customers are generally more loyal to the Hospital brand and eco-system vs in other specialities where star doctors generally call the shots. This is an inherent advantage with the company
For their new hospital to break even ( in paediatrics space ), it takes about 30-35 pc occupancy
Company’s broad business split between Gynae + Obstetrics : Paediatrics stands @ 30 : 70
Disc: initiated a tracking position, biased, not a buy/sell recommendation, not SEBI registered
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I was trying to understand why do they have occupancy rates only around 50%
i do know they have kept 30% of beds for NICU (complex cases)
but this 30% should have some backing & reasoning right, i mean if mgt has kept 30% beds aside they might be expecting these cases
but inspite of that the occupancy is only around 50%
so if we only have such occupancy, why can’t they tweak this 30% of the beds and make it more flexible for other normal usage as well
so in this way the occupancy can shoot up, while still catering well to NICU market.
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and also apart from that, they have entered the NCR region which is a proper greenfield expansion…180crs of Land and other 400crs of expenses for 400beds so the capex/bed for this will be around 14-15mn (all the other beds of rainbow is around 5-6mn/bed)
So did they mention anything regarding the expecting ARPOB from these 400 beds because that will help to us to understand how well they can utilize these beds to keep the ROCE intact in coming years because historically they always had superior return profile
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From the Q3FY25 concall. The Delhi-NCR hospital is planned to be positioned at a higher level with more international patients hence the higher capex / bed. So, expect stable state ARPOB to be higher.
Importantly this is a greenfield expansion so return ratios for this hospital would be depressed for a good 2 years or so due to front-ended costs.
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