Hospital Sector Analysis
Q1FY23 Results
Hospital Sector – Q1FY23 Result Comparison
Rs. In Crores
Revenue
EBITDA
EBITDA Margin
Net Profit
Q1FY23
QoQ
(%)
YoY (%)
Q1FY23
QoQ (%)
YoY (%)
Q1FY23
QoQ (%)
YoY (%)
Q1FY23
QoQ (%)
YoY (%)
Apollo
3795.60
7.03%
0.94%
490.74
5.94%
-5.60%
12.93%
-13 bps
-90 bps
317.11
251.80%
-35.19%
Fortis
1487.85
7.96%
5.50%
251.10
13.50%
-8.77%
16.88%
82 bps
-264 bps
122.25
79.86%
-53.61%
Narayana
Hyudayalaya
1033.43
9.86%
20.15%
191.97
9.65%
43.26%
18.58%
-3 bps
300 bps
110.55
60.40%
45.12%
Max
Healthcare
1066.27
13.58%
6.61%
264.36
25.73%
8.26%
24.79%
240 bps
38 bps
172.83
39.68%
17.64%
KIMS
495.51
33.08%
4.72%
137.16
20.76%
-4.53%
27.68%
-282 bps
-268 bps
69.96
-13.30%
-21.48%
1. On both YoY and QoQ basis, all hospital players witnessed good growth on the revenue side. This was mainly because of
rise in elective procedures which people had postponed till the pandemic effects were high.
2. On the margin side, almost all companies have managed to maintain their previous levels. KIMS saw a decrease in their
margins because of its acquisition of Sunshine Hospitals getting completed during the quarter. Sunshine operates at lower
margins compared to KIMS.
Hospital Sector – Q1FY23 Performance Drivers
Company
Key Reasons
Apollo
Hospitals
1) The company earned 39% of the quarterly revenue through the pharmacy business of the company
2) The company has a total of 71 hospitals (44 owned) on 30th June, 2022 with a total bed capacity of 9911
(includes managed hospitals). The operational beds in the hospitals owned by the company were 7864.
3) The company has a total of 4761 pharmacy stores at the end of Q1FY23 (Net addition of 232 pharmacy
stores in Q1).
Fortis
Healthcare
1) Contribution of Covid revenues (in hospital business) in Q1FY23 was a negligible 0.6%. In Q4FY22 this was
6% compared to 45% in Q1FY22 (Covid 2nd wave effect)
2) The company had a bed occupancy rate of 65% during the quarter. In comparison, occupancy rate was 65%
in Q1FY22 as well and 59% in Q4FY22.
3) In the case of the diagnostic arm of the company – SRL Labs, the Covid revenue during the quarter was 6%
of its total diagnostic revenue in Q1FY23. In comparison, Covid revenue was 45% of total revenue in Q1FY22
(Covid 2nd Wave) and 22% of total revenue in Q4FY22 (Omicron Wave).
1) Recovery of high end electives continued in this quarter. In Q1FY22, unlike other hospital companies, NH did
not have a huge inflow of Covid patients because of highly specialized nature of their units. Due to this, the
Narayana
YoY numbers are good for the company.
Hrudayalaya 2) 35% of the company’s revenues from India operations have been from Bengaluru region which also has the
company’s flagship hospital. The three hospitals in this region have earned a combined EBITDA of 31%
during the quarter. In Q4FY22, this region earned a margin of 28%.
Hospital Sector – Q1FY23 Performance Drivers
Company
Key Reasons
1) EBITDA per bed of Rs. 62 lakhs earned by the company during the quarter
2) Compared to the previous quarter (Q4FY22), the revenue has increased by 14% and the EBITDA has
increased by around 24%. In Q4FY22, the Omicron wave had an adverse effect on the operation of the
Max Healthcare
company since this led to lower Non-Covid revenue due to lockdown and Covid hospitalizations were low
due to Omicron being a mild variant.
3) The company had a bed occupancy rate of 74% during the quarter.
Krishna
1) Cardiac Sciences have contributed the highest at 19% to the revenue mix during Q1FY23
Institute of
2) Compared to the previous quarter (Q4FY22), the revenue has increased by 33% and the EBITDA has
Medical
increased by around 21%. The key reason for this is consolidation of Sunshine Hospitals with KIMS which
Sciences (KIMS)
has resulted in an increased topline.
Hospital Sector - Revenue & EBITDA Trend
Revenue Trend
4000
3500
Revenue in Crs
3000
2500
2000
1500
1000
500
0
Q1FY21
Q2FY21
Apollo
Q3FY21
Fortis
Q4FY21
Q1FY22
Narayana Hrudayalaya
Q2FY22
Max Healthcare
Q3FY22
Q4FY22
Q1FY23
KIMS
*KIMS is a newly listed companies. Since, quarterly reporting was not mandated before their listing, the data for the same is not available
Hospital Sector - Revenue & EBITDA Trend
EBITDA Trend
EBITDA Margin Trend
700
35%
615
587
600
30%
520
491
500
25%
463
400
300
20%
287
284
275
244
200
246
239
221
175
169
134
144
251
210
192
175
15%
10%
137
130
129
264
114
100
5%
0
0%
Q1FY22
Apollo
Q2FY22
Fortis
Q3FY22
Narayana Hrudayalaya
Q4FY22
Max
Q1FY23
KIMS
Q1FY22
Apollo
Q2FY22
Fortis
Q3FY22
Narayana Hrudayalaya
Q4FY22
Max Healthcare
Q1FY23
KIMS
Hospital Sector – Q1FY23 Earnings Call Highlights
Company
Q1FY23
Apollo
• 41% of the revenue was from insurance route – This has positively impacted the ARPOB during the quarter.
• Surgical revenue during the quarter was 68% of the total revenue. This has increased from 60% in Q1FY22.
This is a higher margin service.
• International patients are 85% of pre-Covid levels in terms of volumes – In terms of revenue, the metric is
already at pre-Covid level.
• The capex in the new acquisition of Gurgaon would be a maximum of Rs. 900 Cr – Rs. 450 Cr would be spent
in acquisition, around Rs. 350 on building and other expenses.
Fortis
• The numbers on surgicals are encouraging and at 61% of the revenue contribution, these are at all time high
for any quarter.
• The brownfield expansion plan of the company – Adding 1500 beds in the next 3 years would be funded
through internal accruals.
Narayana
Hrudayalaya
• The company registered highest ever EBITDA margin in their India operations during the quarter.
• Currently the ALOS (average length of stay) is around 4.6 days. The company plans to bring it down to
around 4 in the long run.
• Capex plans over the next 3-5 years is of around Rs. 700-1000 Cr.
Hospital Sector – Q1FY23 Earnings Call Highlights
Company
Q1FY23
Max
Healthcare
• The company has taken a price hike of around 2-2.5% in the quarter.
• International patient mix is already back to pre-Covid levels. Afghanistan forms a key part of international
patient mix for the company and this is yet to normalize.
• Max Lab, which is a non-captive pathology vertical reported gross revenue of Rs.26 crore. It added 90
channel partners during the first quarter of FY23, taking the overall active clients to 850 plus.
Krishna
Institute of
Medical
Sciences
• Average length of stay has improved to 4.14 from 4.59 on quarter-on-quarter basis.
• KIMS has curved a special niche for itself in the areas like organ transplantation, neurosciences, oncological
sciences, renal sciences and gastro sciences. The management hopes that the acquisition of Sunshine
Hospitals will enable it to reach more patients particularly from the orthopedic segment.
• April and May months were unusually bad for the company during this year. However, things picked up
quickly in late May.
• The company expects its new hospital in Nashik and Bengaluru to be operational within 15-18 months.
Hospital Sector - Segment Analysis
ARPOB (Average Revenue per
Operating Bed)
Average Occupancy
74%
58% 60%
68%
65%
74%
66%
63500
59%
48510
51999
51507
66000
53699
30192
25144
APOLLO
FORTIS
NARAYANA
HRUDAYALAYA
Q4FY22
MAX
HEALTHCARE
KIMS
APOLLO
Q1FY23
FORTIS
NARAYANA
Q4FY22
MAX
KIMS
Q1FY23
*Narayana Hrudayalaya has not disclosed average occupancy levels and ARPOB in their investor presentation.
1. The occupancy levels of all hospitals have improved on a QoQ basis with the only exception being KIMS. The reason for the
same is with the consolidation of Sunshine Hospitals, the overall occupancies have diluted since Sunshine operates at
around 40% average occupancy.
2. Max Hospitals continues to see healthy increase in its ARPOB. All other players have also improved this mainly due to a
superior case mix in post Covid environment.
Hospital Sector - Headwinds and Tailwinds
Tailwinds
Headwinds
1) Massive scope for operating leverage to play - Hospitals need to be
open 24x7, they need to be adequately staffed in case there is a
sudden rise in people requiring hospitalization (Eg – Covid pandemic).
Hence, the fixed costs will be a drag in times when the demand for
their services is low but operating leverage play will massively improve
margins during good demand
1) The sector is very capital intensive. Land, building, medical
equipment etc., require heavy investments along with high operating
costs. This creates a significant barrier to entry and expansion, and is
one of the key reasons why bed density continues to lag requirements
2) Due to high cases of Covid in the country, people who had delayed
electives surgeries would opt for the same now. This is a high margin
business for the hospitals and would help in margin expansion
2) Hospital sector in India is heavily regulated with major regulations
in licensing, approvals, prices of drugs and consumables
3) There is an increase in per capita healthcare expenditure due to
rising income, easier access to high-quality healthcare facilities and
greater awareness of personal health and hygiene
3) For an average Indian, affordability is still an issue – The average
revenue per operating bed of the listed players is around 25k-60k per
day. Hence, getting hospitalized is an expensive affair. 60% of expenses
in India are paid by the patients out of pocket. Hence, demand can be
bit of a concern for the bigger players
4) Specialized surgeries are a high margin business. Almost all players
in the industry specialize in one or more of specialized surgeries – For
eg. ECMO treatment in case of KIMS and Cardiac Sciences in case of
Narayan Hrudayalaya. These businesses will increase EBITDA % as the
economy gradually opens up.
Hospital Sector – Growth Graph
Hospital Sector - Stock Update
Current
Market Price
(Rs.)
Market
Capitalization
(Rs. In Crores)
Earnings Per
Share (EPS)
(TTM)
Current P/E
Ratio
Median PE- 3
Years
Median PE- 5
Years
Apollo
4,210
58,546
63.52
66.27
74.94
77.57
Fortis
293
22,332
5.43
54.00
36.52
-
Narayana
Hrudayalaya
718
14,587
18.55
38.71
41.41
45.62
Max Healthcare
388
37,050
6.61
58.72
95.27
95.27
1,221
9,650
39.54
30.88
49.55
49.55
Company
KIMS
Disclaimer:
This Hospital Sector report has been prepared by the InvestYadnya Team based on the Quarterly Result of the companies. This
report should not be the basis for the stock selection of the investors. Do follow due diligence before making any investment
decision.