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
5 Likes
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.
3 Likes
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
3 Likes
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
6 Likes
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.
2 Likes
That is overall occupancy level. Mature hospitals have higher (~70%) with newer ones significantly lower (~35%) thus dragging the average down.
Mature hospitals:
Newer hospitals:
2 Likes
Rainbow Children’s Medicare -
Q4 and FY 25 results and concall highlights -
Company’s current footprint of hospitals -
Hyderabad - 8 hospitals + 2 Clinics
Bengaluru - 4 hospitals + 1 Clinic
Chennai - 3 hospitals
Vijaywada - 1 hospital + 1 Clinic
Vishakhapatnam - 1 hospital + 1 Clinic
Delhi - 2 hospitals
Combined bed capacity @ 1935 beds ( mature hospital beds @ 1237, new hospital beds @ 698 beds )
No of serving doctors @ 910
Q4 outcomes -
Revenues - 370 vs 341 cr, up 9 pc
EBITDA - 115 vs 105 cr, up 9 pc
PAT - 57 vs 51 cr, up 11 pc
Occupancy @ 46.5 vs 48.5 ( mature hospitals occupancy @ 52 pc, new hospitals occupancy @ 35 pc )
ARPOB @ 58.1 k vs 54.2 k
ALOS @ 2.77 vs 2.84 days
FY 25 outcomes -
Revenues - 1515 vs 1296 cr, up 17 pc
EBITDA - 490 vs 428 cr, up 14 pc
PAT - 244 vs 218 cr, up 12 pc
Avg growth in expenses like Depreciation, Employee costs, professional fees to doctors, finance expenses were @ 19 pc vs a 17 pc growth in topline
FY 25 occupancy @ 50.5 vs 47.9 pc
FY 25 ARPOB @ 53.9 k vs 55.8 k
FY 25 ALOS @ 2.85 vs 2.65
Payor profile for FY 25 -
Cash @ 48 vs 49 pc
Insurance @ 52 vs 51 pc
Region wise breakup of bed capacity -
Hyderabad - 940
Bengaluru - 442 ( another 150 beds are likely to come up in FY 26 )
TN - 270 ( another 130 beds are likely to come up in FY 27 @ Coimbatore )
NCR - 24 ( another 400 beds are expected to come up in FY 28 @ Gurugram )
AP - 259 ( another 100 beds are expected to come up in FY 26 @ Rajahmundry )
- Beds @ Malviyanagar are only managed by the company
Q4 was unusually weak ( vs a strong Q2 and Q3 )
Cash on books @ 700 cr. All the planned capex ( as mentioned above shall be funded via cash on books + internal cash generation )
Capex for FY 25 stood @ 145 cr
2 Hospitals / 124 Beds shall move from new to mature category by end of FY 26. New 250 beds @ Bengaluru and Rajamundry shall be added to new bed capacity within FY 26
Company’s IVF business grew strongly @ 70 pc YoY. They have started offering IVF facilities across 13 of their hospitals. IVF revenues in FY 25 stood @ 45 cr
Q4 saw unusual dip in revenue from paediatric division. Mothercare divisions performed as per expectations
Expecting the ARPP ( avg revenue per patient ) to grow @ mid - high single digits in FY 26. ARPP grew by 5.6 pc in FY 25 vs a 3.4 pc decline in ARPOB. ARPP is a better matrix to look at, since ALOS is beyond the Hospital’s control
Broad breakup of business @ 30 pc from mother care ( including IVF ), 70 pc from Paediatrics
Company incurred an EBITDA loss of 12-13 cr for FY 25 from the new hospitals it commissioned in FY 24. These hospitals should turn EBITDA positive in FY 26
Expecting FY 26 margins be similar to FY 25 margins
Aiming for mid - high teens revenue growth for FY 26
Since paediatrics is their mainstay ( and likely to remain like that forever ), some element of seasonality shall always be there in company’s Qtly results
Disc: holding, added more recently, not SEBI registered, not a buy/sell recommendation, posted for educational purposes only
5 Likes
Hi,
Can anyone help me understand the following points
a) Life Time Value of Child and Mother at the hospital: This includes from the 1st Trimester to the delivery and then follow ups and vaccination.
b) % of kids borne pre-mature resulting in better realization for the hospital
c) C - sec vs normal deliveries
d) % kids born with difficulties
e) are they into fertility treatment as well
g) are they planning to enter into management contract like hotels where asset cost is completely on the asset owner.
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