Yatharth Hospital & Trauma Care Services Limited

[chikspat]

Business Overview:

Yatharth Hospital & Trauma Care Services Limited is a leading healthcare provider in the National Capital Region of Delhi, India. It operates three super specialty hospitals in Noida, Greater Noida, and Noida Extension, with an additional 305-bed hospital in Jhansi-Orchha, Madhya Pradesh. The total bed capacity is 1,405, including a robust critical care program. All hospitals are accredited by NABH, and those in Greater Noida and Noida Extension are also accredited by NABL.

Led by Dr. Ajay Kumar Tyagi and Dr. Kapil Kumar, each with over 17 years of experience, Yatharth has strong brand equity. It engages in various branding activities, including medical camps, community outreach programs, and continuous medical education. Empaneled with insurance providers and government organizations, the company’s operational beds grew at a CAGR of 27.52% from 864 in March 2021 to 1,405 in March 2023.

As of March 31, 2023, company engaged 609 doctors and offer healthcare services across several specialties and super specialties. For better and more focused patient care, company have carved out the following super specialty as Centre of Excellence (“COE”): • Centre of Medicine • Centre of General Surgery • Centre of Gastroenterology • Centre of Cardiology • Centre of Nephrology &
Urology • Centre of Pulmonology • Centre of Neurosciences • Centre of Pediatrics • Centre of Gynaecology • Centre of Orthopedics & Spine & Rheumatology.

Competitive Strength:

1. Diverse Specialties and Payer Mix: Yatharth is among the leading super-specialty hospitals in Delhi NCR, offering a broad range of healthcare services across specialties and super specialties. Their Centers of Excellence cover areas such as Medicine, Cardiology, Neurosciences, General Surgery, Nephrology & Urology, Pediatrics, Gastroenterology, Pulmonology, Gynecology, Orthopedics & Spine, and Rheumatology.
2. Comprehensive Healthcare Services: Operating at all levels of healthcare from primary to tertiary, Yatharth positions itself as a one-stop destination for patient needs. They completed a significant number of surgeries and dialysis procedures, showcasing their capability and reach.
3. Diversified Revenue Streams: Yatharth’s revenue diversification across specialties, hospitals, and customer mix provides a de-risked business model. This allows them to implement effective pricing and marketing strategies to attract a varied customer base.
4. Attractive Quality Staff: The success of Yatharth is attributed to its ability to attract highly qualified medical professionals, including doctors, nurses, paramedical, and support staff. The team includes regular faculties and attendees at premier medical conferences.
5. Experienced Management Team: Yatharth is led by an experienced and qualified management team. The combination of healthcare and management professionals in the corporate setup, along with a diverse Board, contributes to the company’s growth and adherence to high corporate governance standards.
6. Advanced Medical Equipment and Technology: Yatharth invests in advanced medical technology and equipment to support practitioners in delivering timely and efficient healthcare. Their commitment to introducing cutting-edge medical technology across all aspects of healthcare services demonstrates their dedication to staying at the forefront of the industry.
7. Stable Operating and Financial Performance: Yatharth has maintained stable operating and financial performance over the past three fiscal years. Their growth in revenue and profitability is attributed to operational efficiency, streamlined functions, process innovations, and the maintenance of economies of scale. The company strategically manages capital expenditure, optimizing available space and working efficiently with equipment suppliers.
8. Strategic Capital Expenditure: Yatharth’s prudent capital expenditure approach involves acquiring land on a long-term leasehold basis and constructing civil structures independently. This strategy helps in maintaining a lower capital expenditure per operational bed while expanding their footprint.

Key Strategies:

1. Enhance Quality and Efficiency:

• Recruit experienced doctors and deepen expertise.
• Focus on advanced specialties with high demand.
• Monitor and manage operating expenses.

2. Expand Scale:

• Grow organically and through acquisitions.
• Explore opportunities in adjacent regions.
• Increase bed capacity in existing hospitals.

3. Introduce New Specialties:

• Add radiation therapy for oncology.
• Establish organ transplant units.

4. Attract Skilled Professionals:

• Engage quality medical professionals.
• Strengthen collaborations with institutions.

5. Leverage Technology:

• Adopt robotic surgery and cutting-edge tech.
• Regularly update equipment.

6. Grow Medical Tourism:

• Position as a preferred destination.
• Capitalize on India’s cost advantage.
• Establish ties with tourism firms and embassies.

Peer Comparison:

Financial Performance:

Expansion and Diversification:

• The company is focused on diversifying its range of medical specialties and introducing new ones across all its hospitals, with double-digit growth seen in most specialties.
• The company is committed to enhancing its suite of Oncology services and aims to offer robotic surgeries and a comprehensive suite of Oncology treatments by Q4 of this fiscal year.
• The company has concluded around 100 kidney transplants and is expanding its organ transplant and medical tourism business.
• The company aims to double its bed capacity over the next 3-4 years through a mix of greenfield and brownfield expansion.
• The company plans to acquire one hospital before the end of the fiscal year and has a Capex plan of around ₹800 crores for the next three years.

Occupancy and Hospital Overview:

Risks and concerns
• YHTCL is highly dependent on doctors, nurses and other healthcare professionals and its business and financial performance will be impacted significantly if company unable to attract, retain or train such professionals.
• The Company depends on the strength of its brand and reputation. Failure to maintain and enhance those brand and reputation, and any negative publicity and allegations in the media against this, may materially and adversely affect the level of market recognition of, and trust in, the services, which could result in a material adverse impact on company’s business, financial condition, results of operations and prospects.
• If Company unable to increase its hospital occupancy rates, it may not be able to generate adequate returns on its capital expenditures, which could materially adversely affect the operating efficiencies and also the profitability.

Technical:
Trading above 50 DMA of 381.
Under consolidation.
Pivot Point is 441.

In short:

1. Company may demonstrate operating leverage.
2. Attractively priced compared to peers, specially Global Health which is most near peer.
3. Aims to double its capacity in next 3-4 years.
4. After IPO it become net debt free, effect of debt repayment will be more visible in Q3.
5. Jhnsi Hospital occupancy is only 19%, which expected to improve.

Last company presentation: https://www.bseindia.com/xml-data/corpfiling/AttachHis/a8a49c05-2bd4-43b1-8cf4-9712c11581d2.pdf

Disclosure:
Invested and looking to add

[Devender_Bindal]

@chikspat what is your view on the ongoing court case on the Ramraja hospital. They have got the stay though but it will hamper there growth in any sense. Given revenue is very low from that hospital.

Disclosure:
Invested and biased.

[chikspat]

Hi Devender Jhansi Hospital occupancy was 13.13% at the time of DRHP filing during IPO. September 2023 result presentation occupancy is 19%. This issue happened somewhere in November end.
I will watch % occupancy in December and March quarter. If improvement is seen, means issue due not have any material impact on operation.

Let us continue to monitor that issue.
Thanks for your question.

[Krishna19]

Where to find hospital bed capacity?
How to calculate per bed earning ?

[chikspat]

In this thread I put four slides from company presentation that give bed capacity, means no. of beds and Average Revenue Per Occupied Bed ( ARPOB). We can do simple math.

[Krishna19]

Sir, in future if I want this data again then where I got this data?

[luckbychance]

Cross posting from another thread:-

Yatharth Hospitals posted its results yesterday:-

Can someone help explain to me if Q3 has any sort of seasonality? I don’t see a reason for QoQ degrowth otherwise.

Anyways, posting few of my observations:-

1. Noida extension is emerging as a super speciality hub with robotic surgeries starting in Q3FY24 and Oncology treatment starting in Q4FY24. One can see the effect in ARPOBs, which is substantially higher (at 34k) vs the next best in Yatharth i.e. Noida hospital at 30k

To build on this further, the Noida extension occupancy is currently at 45% and the company is undergoing a brownfield expansion to add 250 beds to take total hospital capacity at 700.

Imo, this is a very favorable upside trigger for the ARPOBs and for overall ROCEs.

2. Greater Noida hospital also registers a 10% ARPOB increase (possibly driven by transplants?). Despite lower footfalls, the overall revenue of the hospital is up by nearly 20%. This indicates the growing mix of higher specialities. Occupancy levels remain at around 70% and the company is undergoing another brownfield expansion of 200 beds.

3. Acquisition of Asian Fidelis for 116crs cash. Sector-88 is a fairly populated area in Faridabad and with upcoming infra (connectivity from Jewar Airport in next 1-2 years), Faridabad will naturally have higher residence density. Needs to be seen how Yatharth can scale the metrics in this hospital. Prima facie, the acquisition looks fairly cheap.

Zooming out, Yatharth is adding nearly 250+200+175 = 625 beds, taking total bed capacity to >2k in next 1-2 years. This is a near 40% capacity addition.

4. Valuations, I estimate FY24 EBITDA to be at around ~180 crs and with current acquisition, the net cash comes out to be around 180 crs. So EV is 3600 crs or lower if cash accruals in 9MFY24 are somewhat healthy. Assuming 3600crs though, current EV / EBITDA is 20x. Peers trade at much higher valuation:-

However, the peers in NCR region trade at much higher valuation. Part of the higher valuation is justified because Apollo, Max, Medanta, Fortis all are well recognised and much older brands with greater surgical prowess.

Hard to estimate the EBITDA growth for next year, but conservatively I expect EBITDA to register 40% increase primarily due to:-

a) Contribution from Asian Fidelis (around 20crs total).
b) Higher ARPOBs across hospital (barring Noida). I expect ARPOBs to inch up by 10-15%

FY25E EBITDA: 252
Expected net cash surplus: ~ 300 crs

Basis the above, Yatharth is currently trading at ~14x FY25E EV/EBITDA.

D - Invested (from lower levels) & biased

[chikspat]

I invested in Global Health when its EV/EBITDA was 26 now is 40, and it delivered consistent growth, resulting in over 100% price increase. Following the same strategy,
I am invested in Yatharth Hospital, expecting a similar market response if it demonstrates consistent growth.
Jhansi Hospital occupancy is at 20%, need to listen concall.
Disclosure: Invested in Both.

[Maheshcm]

Thanks for good summary. I had expected QoQ revenue increase considering 1) Q3 is seasonally better for hospitals,
2)expected Noida extension hospital to extend the trajectory of revenue growth and occupancy rate
3)Had expected Jhansi hospital to improve occupancy, its too low though they have acquired it a while back.
4) Expected overall ARBOP to show improved trajectory considering they are investing in improving infra and surgical equipments.
It might be worth to listening to cancall tomorrow to understand why these havnt happened and what to be expected.

Overall on a good trajectory , isnt the Faridabad acquisition on a higher end considering its location and size? They paid rs-55 crore for Jhansi hospital with over 200beds 1 year back…

I think , for the valuations to catch up, they have to make much improvements to specialties and quality of doctors. However , their operational efficiency and return on capital for mature hospitals is very encouraging. I was hoping new acquisitions as triggers with their current cash position. The one immediate was mostly expected from their commentary last 1-2 quarters.
Also may be net cash would be lower that what you have estimated considering they are investing on equipments at current hospitals…

Any update on receivables? They have good chunk of revenue from govt affiliated patients (ex-defense and others)…

[Maheshcm]

If things play out for the newly acquired hospital as they are currently executing, when the occupancy reaches around 80% they can achieve a 32% returns on the acquired hospital, assumption of Rs25000 ARPOB is reasonable I think, however need to hear from the call tomorrow.

no of beds at 80% ocupancy	ARPOB -Rs	Annual_rev Rs Cr	Ebita at 27%	invested capital Rs Cr	ROE %
144	25000	131.4	35.478	110	32.3

also , most multispecialty hospitals have seen tailwind of covid, may be because some surgeries were may be on hold because of covid, so need to watch if thats the case or is there a secular trend in organized hospitals growth…

[luckbychance]

Not sure if Q3 is seasonally better… nearly every hospital has faced a QoQ degrowth.

Well, I’m sure there’s a difference between Faridabad, which is part of NCR and Jhansi Orcha, so can’t expect 55crs again. The land cost itself might be significantly higher.

[Maheshcm]

I agree most hospitals have shown marginal quarter over quarter decline, but I had expected Yatharth
Noida extension hospital to show continued improvement considering its running lower than 50% occupancy, the winter in north India, mild covid cases and Jhansi with 250 Beds running at very low occupancy should have picked up momentum. May be they will grow slower and incrementally…

[luckbychance]

Con Call Highlights

1. Q3 occupancy lower due to many festivals etc in between which delays a lot of elective surgeries. Jan utilisation levels are higher and Q4 is likely to be materially higher than Q3

2. EBITDA breakeven for Asian Fidelis in 2 years. Likely ARPOB between Greater Noida & Noida Extension (upwards of 30k).

3. Jhansi Orcha is currently running at 6% EBITDA levels, to reach optimum utlisation capacity by next year (indicating big bump in next few quarters… since Q3 utilisation is around 22%)

4. Receivables has inched up mainly due to government side… but they are likely to be in control and release in the coming months

5. Robotic surgeries started in Greater Noida & Noida Extension and ARPOB is likely to inch up further in Q4. Radition oncology will also help that.

6. No EWS obligation on the hospital. Lands bought at market rates.

7. International patient ARPOB is higher. To get a boost once Noida airport starts (slated for end 2024 with 1 runway)

8. Tax was kept higher due to some conservative calculations, would normalise in subsequent few quarters

9. Brownfield expansions (Greater Noida & Noida Extension) to come up in next 1-2 years since the hospitals would reach the utilisation by then.

10. Confident of maintaining EBITDA % as in FY24 in the next year despite losses from Asian Fidelis (higher ARPOB is coming!)

Hoping for a bumper Q4 given higher ARPOBs and utilisation.

D - Invested

[chikspat]

Notes from screener for Q32024 conference call:

Financial Performance:

• Revenue growth of 21% year-on-year
• Profit after tax increased by 39%
• EBITDA of INR464 million
• Profit after tax of INR295 million
• Reduction in finance costs by 97% year-over-year

Operational Updates:

• Introduction of robotic surgeries with Da Vinci X and Stryker’s Mako robots
• Expansion of transplant services to include liver transplants
• Acquisition of Asian Fidelis Hospital in Faridabad, Delhi NCR
• Plans for bed capacity expansion in Noida and Greater Noida hospitals
• Focus on enhancing specialty mix and expanding oncology services
• Development of high-end transplant programs and oncology services
• Doctor attrition controlled, less than 10%
• Strategic initiatives to explore organic and inorganic growth opportunities

Future Growth Strategies:

• Plans for future growth through medical tourism in markets like Bangladesh, CIS countries, Iraq, and Africa
• Expectation of EBITDA breakeven for Asian Fidelis Hospital within two years
• Expecting sizable turnover in the second year with solid EBITDA margins
• Focus on operational efficiency and adaptability for margin expansion

Challenges and Mitigation:

• Explanation for decline in IPD and OPD volumes due to extended winter season and flu season in the region
• Receivables at 100 days, government payments sluggish
• Jhansi occupancy impacted by seasonal dip, new management team in place

Overall Outlook:

• Q4 results expected to be better
• Meeting after Q4 results are out to discuss further strategies
• Emphasis on delivering good results and continued growth in the future.
  D: Invested

[luckbychance]

638442089636595496_Yatharth%20Hospitals%20&%20Trauma%20Care%20Services%20Ltd%20-%20Initiating%20Coverage%20Report%20-%20SMIFS%20Institutional%20Research.pdf

Smifs have initiated coverage with TP of 658. I feel their FY24 and FY25 estimates are way too conservative on the ARPOB front. The target will likely be revised post Q4 since they’re baking nearly flat QoQ profit growth for Q4 when the concall remarked materially higher occupancy

[chikspat]

Health risks for hospitals amid SC diktat, steep valuations

As article points out, Kotak estimates very low probability of applying this type of law.
Nomura says if middle ground is taken, it can be implemented on non complex procedures. However, this reminds of regulatory risk and it may overhang on all hospital stocks.
D: Invested

[vl10]

Thanks everyone for the useful insights.

Does anyone know why Yatharth has better EBITDA margins than peers despite being behind on all key operating parameters (# of beds, ARPOB, occupancy etc.)

Yatharth’s profitability numbers look excellent, but I am not able to square this with their operating parameters. It is possible i do not understand the business, so happy to learn more.

[Maheshcm]

This may not fully explain, but their specialties are fewer(currently), so fewer specialist doctors, fewer special medical consumables and I also vaguely remember their doctor and human resource related wages expenses lower comparatively. Their receivables a notch higher , they service govt supported patients, I presume these could be general internal medicine related so decent margins for these kind of medical services. If you notices their margins generally on decline, that might explain as they are increasing specialties , their expenses are going up(but they are also expanding so operating costs also increase).

[Abhay_Sahukar]

• Good set of numbers. Management to maintain same level of growth in the topline & with stable EBITDA margins.
• A new hospital in Faridabad which consist of 200 beds has been acquired which has started its operations. Occupancy of this hospital will soon (~1 year) reach the same as of Jhansi-Orchha’s levels. This will not impact in overall EBITDA margin.
• Bit concerning on the balance sheet side as receivables gone up to Rs.227cr from Rs.108cr due to high contribution of Govt business mix (35-40%) & also due to Elections the payments are delayed from governments end.
• Management commented that receivable will improve in coming quarters & working on to keep it on lower end.
• Management is focused on improving ARPOB & International business as the volumes are increasing in it, not much focused on payor mix.
• Finding opportunities to expand in North India.
  
  
  
  

[omsingla]

Read everything about the company and growth rates, margins, everything was top notch. Then opened Credit rating report and found this… Is it a red flag??
Disc. Not invested