KIMS — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
MANAGING DIRECTOR · DR. ABHINAY BOLLINENI - EXECUTIVE DIRECTOR AND
DR. ABHINAY BOLLINENI - EXECUTIVE DIRECTOR AND
CHIEF EXECUTIVE OFFICER · MR. VIKAS MAHESHWARI – CFO
MR. VIKAS MAHESHWARI – CFO
Moderator · Conference Operator
MR. RAHUL JEEWANI – IIFL KIMS Hospital May 20, 2022
Ladies and gentlemen good day and welcome to the KIMS Hospital Q4 FY22 Earnings Conference Call hosted by IIFL Securities Limited.
As a reminder, all participants’ lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing ‘*’ then ‘0’ on your touchtone phone.
Please note that this conference is being recorded.
I now hand the conference over to Mr. Rahul Jeewani from IIFL Securities Limited.
Thank you and over to you sir.
Rahul Jeewani
Hi good morning every one this is Rahul from IIFL Institutional Equities I welcome you all to
Moderator · Conference Operator
Thank you.
The next question is from the line of Anubhav Agarwal from Credit Suisse.
Please go ahead.
Anubhav Agarwal
Just a clarity on that the Nashik that you have mentioned.
So, you guys have 51% stake 160-180 crores is all what you will be putting in, so Dr. Nagarkar is not putting his equity?
Moderator · Conference Operator
Thank you.
The next question is from the line of Bhavya Gandhi from Dalal & Broacha.
Please go ahead.
Bhavya Gandhi
Sir I just wanted inpatient revenue and outpatient revenue for entire year and for the quarter.
Moderator · Conference Operator
Thank you.
The next question is from the line of Pritesh Chheda from Lucky Investment Managers Pvt.
Ltd. Please go ahead.
Pritesh Chheda
Sir, just wanted understand in term of the operational beds what is the addition that we will see over the next couple year, because I think it has to be meet from your exiting assets only, right?
Moderator · Conference Operator
Thank you.
The next question is from the line of Sanjay Awatramani, from Envision Capital.
Please go ahead.
Sanjay Awatramani
Can you tell me the guidance for capex which you have mentioned for FY2023 and FY2024.
Moderator · Conference Operator
Thank you.
The next question is from the line of Rahul Jeewani from IIFL Securities.
Please go ahead.
Rahul Jeewani
You indicated that you have a relook at the Tamil Nadu or Chennai expansion which you were pursuing given that you find the Nashik opportunity to be a better one but did you see anything incremental in the Chennai market in terms of competitive intensity which has allowed you postpone your plans and what gives you confidence with respect to the Bangalore market given that you are saying that the Bangalore expansion is still on track.
Moderator · Conference Operator
Thank you.
The next question is from the line of Nidhi Babaria from Dalal & Broacha.
Please go ahead.
Nidhi Babaria
Basically Sir, I want to know what type of peer analysis do we do before entering into new markets.
So, lets say now we are coming to Nashik, what is our view with regards to some of hospitals over there, like we already have Apollo over there and there are some standalone hospitals also Sahyadri and again HCG in oncology.
So, what are the parameters for us to go into these market.
Moderator · Conference Operator
Thank you.
The next question is from the line of Anubhav Sahu from MC Research.
Please go ahead,
Anubhav Sahu
Couple of questions on the expansion plan.
So, I got the point that Chennai is not top the radar and currently we are focused on Bangalore and Nashik.
But still your time is mentioned that in next two years probably Chennai should happen, so if that is the case just wanted to confirm that.
KIMS Hospital May 20, 2022
Moderator · Conference Operator
Thank you.
The next question is from the line of Praveen Sahay from Edelweiss Financial.
Please go ahead.
Praveen Sahay
Just a clarification on Sunshine Hospital you said about the improvement in the per month revenue and the margin to achieve in the next three years.
Moderator · Conference Operator
Thank you.
The next question is from the line of Bhavya Gandhi from Dalal & Broacha.
Please go ahead.
KIMS Hospital May 20, 2022
Bhavya Gandhi
Sir I just wanted to understand the margin guidance because we have Sunshine dilution because our EBITDA margins are a lower level, then Nashik, so broad level company level what kind of margin are we expecting may be for next couple of years and what kind of inorganic revenue growth and organic growth because almost we are the peak capacity now.
So, if you could just give a broad ballpark number with respect to margin and revenue.
Vikas Maheshwari
As far as, KIMS is concern we will be able to sustain the margins that we have seen in FY2022 and as revenue ramp up happens a large part of that will slow into the EBITDA margin.
As far as, Sunshine is concern we still have been able to be very healthy in the margin profile from where it was when we acquired it versus where it is currently, we have already been able to get to a 20% kind of number.
So, as the ramp up of revenue happens, we are looking to wrap up the revenue almost 50% in Gachibowli and we are looking at almost another incremental 50% revenue coming in Begumpet.
So, almost 50% of that is what we are expecting to flow into EBITDA, we are pretty confident that we will be able to scale to 26%-27% kind of an EBITDA margin at Sunshine Hospital as well.
Bhavya Gandhi
And Sir broad level company level margin for next couple of years.
Vikas Maheshwari
It is a good question actually so since the KIMS as on date on the consolidated is 30% plus 32% EBITDA margin and Sunshine which is a diluted one and it is going to roughly 22%, 25% of the total revenue.
There will be some console EBITDA margins coming down.
So, our guess is it should be between 27%-28% which should be at the blended level.
As we improve the Sunshine operation, obviously the EBITDA and the EBITDA percentage both will go up and there is no equity dilution so these are EPS accretive acquisition.
Bhavya Gandhi
Right and sir broadly revenue growth organic and inorganic and the total blended growth rate.
Vikas Maheshwari
So, generally we do not give the guidance for the future since Sunshine numbers the acquisition numbers are in public domain and if you just analyze that cases you will see that roughly 20% growth coming on the present days of the KIMS.
So, that will added to the revenue and whatever the organic growth comes from the existing operations that will add to the total growth of the revenue.
Bhavya Gandhi
And sir my last question what is the peak capacity for the overall business say for example we are at 58% occupancy level.
So, at max we can scale to what 63%-65%?On commissioned and operationalized.
Vikas Maheshwari
Though it all depends on the case mix and payer mix.
So, generally what happens that once the occupancy at the good level, we may take more cash and insurance patient till time we increase put up more capacity so that will also increase the revenue in the EBIT number and as the hospital mature the profile of the cases coming to hospital means in terms of the critical clinical patient coming, so you will see the ARPP also going up which you can see in the last five years’ time the consistently the ARPP of the patients have gone up, so you will see that and then KIMS Hospital May 20, 2022 operational excellence how to manage beds much better.
So, combination of all so it is very difficult to say with the existing facility how much growth can come because it a operational excellence case mix and peer mix etc., But I think with the existing capacity definitely in the mix 2-3 years Dr. Abhinay has guided that all the existing city can be utilized fully, we can see the growth of 20%-25% from the existing base only.
Moderator · Conference Operator
Thank you.
As there are no questions from the participants.
I now hand the conference over the management for closing comments.
Bhaskar Rao Bollineni
Thank you very much all the participants and very active discussion that happened and then we will be up to the level what investors are expecting and whatever we promised in the road shows and the expansion plant are going on time.
Once again thank you very much for participating.
Moderator · Conference Operator
Thank you very much.
Ladies and gentleman On behalf of IIFL Securities Limited that concludes this conference.
Thank you for joining us and you may now disconnect your lines.
Questions and answers
)oaY · Research Analyst
SECUNDERABAD I KONDAPUR NELLoRE I RA,JAHMUNDRY I SRIKAKULAM I ONGOLE IVIZAG IANANTAPUR IKURNOOL
Moderator · Conference Operator
Thank you very much.
We will now begin the question-and-answer session.
The first question is from the line Praveen Sahay from Edelweiss Financial.
Please go ahead.
KIMS Hospital May 20, 2022
Praveen Sahay
The first question is related to the matured SLT i.e., Nellore, Rajahmundry and Srikakulam.
If I look at the revenue in the last three years, we have not grown much out there.
So, can you a give guidance related these facilities, how you are looking at?
Dr. Abhinay Bollineni
These facilities, yes has not been able to grow in the last years but largely because of capacity constraints.
So, all three locations we have taken initiatives where we are going to build new facilities and expand the current hospital which will add more bed capacity and new clinical specialty which will help them grow.
All of them are for example Srikakulam, we have already had land parcel in the company for quite some time.
This year we are pretty confident we will get permission to scale up the current bed capacity by an incremental 150-200 beds and add a lot of new clinical therapies which will help almost double the occupancy over a period of time.
Like is the case with Nellore, we had made some structural changes to the way that was operating because of bed crunch we had to let go off Aarogyasri as a scheme in Nellore because we have overwhelming footfall from cash patient.
We recently acquired a piece of land which is a kilometer away from the current hospital.
We believe that we can construct at least 200 beds largely for scheme patients and other new clinical therapy and that will also help Nellore grow.
As far as Rajahmundry, this has been a very promising hospital in Andhra.
Unfortunately, we have not been able to get the right land parcel for us to build a very large campus.
Current one is only 120 beds and largely driven by cardiac but in the next 2-3 months we should conclude on land and be able to build a larger hospital.
So, that we can add new therapies like oncology, mother and child, give space for the other specialties to grow.
Bhaskar Rao Bollineni
To add more on what Dr. Abhinay has pointed out, this is the three hospitals which we have built with less than 200 bedded capacity in the beginning then we realized that most of our hospitals turned would be more than 400, 350 like that.
Praveen Sahay
That was helpful, Sir related to that as you said the two of the facilities are expansion of beds.
Also you had Sunshine which is one lower occupancy to improve, then again you had acquired in Nashik.
Further there is also chances in the earlier calls you had said about the Mumbai as well so like how you are actually planning your entire assets like everywhere the expansion and good expansion you are and the JV also ahead with.
So, what is your strategy the way forward for a total, how much is the bed capacity you are looking at in the near terms in the next two years’ time and how to make them full operational and improve the operational efficiency there, can you talk about that.
Dr. Abhinay Bollineni
Sure, like we said in our presentation earlier, we are focusing only in cluster growth and cluster approach.
So, earlier we were talking about further consolidating in AP and Telangana.
Then going greenfield in Karnataka, Tamil Naidu and looking at acquisition opportunities in Central India and we still continue to wanting to do the same we adding more capacity in Telangana for example we recently acquired Sunshine, we are expanding the current Sunshine Hospitals so that we can blink in more clinical therapies and more clinician and we also improving the EBITDA margin if you look what Sunshine was able to do over the last 4-5 years we have actually in the last 5-6 months been able to make significant improvement and we believe once KIMS Hospital May 20, 2022 they move to newer facility and the newer beds are operational, we will then be able to further optimize, the revenue and further optimize the costs.
As far as, Andhra is concern largely about expanding the mature and non-mature hospitals ranging from 50 bed addition to almost 150-200 beds addition.
So, this consolidates almost 1800 incremental beds over the next 3-5 years.
Just in AP and Telangana which is the core market out of which we operate.
Now beyond this we said Karnataka, Tamil Nadu and Maharashtra, we have decided to put Tamil Nadu on hold given the opportunities that we getting in Central India and Maharashtra and we believe that we will look at acquisitions for the short term in Maharashtra where it could joint ventures, any brownfield and that is how it is all panned out.
So, whatever we are looking in Nashik, in Bombay, in Nagpur and few other micro markets all of them are in partnership with local doctors and all of them are either operational or to be operational in short-term and because we have a very strong local doctor connect and local partnership where our resources always been that we look at partnership with doctors be able to attract good talent and that will help propel and grow the hospital that is what we are continuing to do.
As far as Karnataka is concern, because we believe a large opportunity is there, we have a very strong management team on ground, we want to build a greenfield opportunity in that market because very synergistic to AP and Telangana.
Praveen Sahay
Last question on the bookkeeping, so how much is on a ALOS for Q4 and how much is the operating bed currently you have and also can you give a capex number for FY2023 and FY2024.
Dr. Bhaskar Rao B
I think the ALOS I will take, I will have Vikas answer you rest of it.
The ALOS for Q4 is 4.6 against 4.7 of Q3 of FY2022.
Vikas Maheshwari
And as far as the debt is concern Praveen there is still net cash surplus company, on the gross debt side we have a debt of roughly Rs.146 crores but against that we have a fixed deposit of Rs.155 crores plus cash balance.
So, it is a net cash surplus company on debt so far.
Praveen Sahay
Capex for FY2023, FY2024.
Vikas Maheshwari
Capex for FY2023, it all depends upon the opportunity which we are pursuing and rectifying, so we expect this, Bangalore we have taken the definitive step and the Nashik we have taken the definitive steps.
So, on these two assets, we have already told that in the Nashik we will spending roughly in the first phase Rs.160-180 crores to set up first phase of the hospital and for the Bangalore, we will be spending something like that Rs.325-350 crores.
So, we expect that Nashik money to go in the next 12 months’ time and Bangalore of almost 70%-75% and all depends upon the balance opportunity which we are pursuing right now.
So, there is a two clarity right now in terms of brownfield acquisition which we are pursuing is Bangalore and Nashik.
On that roughly you can take, roughly Rs.500 crores outflow on these two assets in 12 to 18 months’ time.
Praveen Sahay
And operating bed Sir, current we have total.
KIMS Hospital May 20, 2022