Kovai Medical Center & Hospital reports 153% CAPEX growth and 20.2% Revenue growth

29-05-2015 • About Kovai Medical Center & Hospital ($KOVAI) • By InTwits

Kovai Medical Center & Hospital reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Kovai Medical Center & Hospital has high CAPEX intensity: 5 year average CAPEX/Revenue was 21.6%. At the same time it's a lot of higher than industry average of 8.3%.
CAPEX is quite volatile: 379 in FY2015, 150 in FY2014, 102 in FY2013, 773 in FY2012, 976 in FY2011
The company has highly profitable business model: ROIC is at 23.0%
It operates with high leverage: Net Debt/EBITDA is 1.1x while industry average is 0.2x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Kovai Medical Center & Hospital ($KOVAI) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	1,747	2,224	2,971	3,340	4,014	20.2%
EBITDA	368	446	710	734	949	29.2%
Net Income	121	119	204	238	385	62.1%
Balance Sheet
Cash	286	255	312	349	553	58.6%
Short Term Debt	174	221	287	295	351	19.0%
Long Term Debt	1,749	2,035	1,794	1,541	1,276	-17.2%
Cash flow
Capex	976	773	102	150	379	152.7%
Ratios
Revenue growth	-63.8%	27.3%	33.6%	12.4%	20.2%
EBITDA growth	42.9%	21.0%	59.3%	3.5%	29.2%
EBITDA Margin	21.1%	20.0%	23.9%	22.0%	23.6%	1.7%
Net Income Margin	6.9%	5.4%	6.9%	7.1%	9.6%	2.5%
CAPEX, % of revenue	55.9%	34.8%	3.4%	4.5%	9.4%	4.9%
ROIC	14.5%	11.5%	18.0%	18.4%	23.0%	4.6%
ROE	26.8%	21.5%	29.1%	26.3%	32.4%	6.1%
Net Debt/EBITDA	4.4x	4.5x	2.5x	2.0x	1.1x	-0.9x

Revenue and profitability

The company's Revenue jumped on 20.2% in FY2015. Despite revenue decline the EBITDA margin expanded. EBITDA Margin jumped on 17.3 pp from -19.1% to -1.8% in FY2015.

Net Income marign increased on 2.5 pp from 7.1% to 9.6% in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 Kovai Medical Center & Hospital had CAPEX/Revenue of 9.4%. CAPEX/Revenue dropped on 25.3 pp from 34.8% in FY2012 to 9.4% in FY2015. It's average level of CAPEX/Revenue for the last three years was 5.8%.

Return on investment

The company operates at high and attractive ROIC (23.00%) and ROE (32.40%). ROIC increased on 4.6 pp from 18.4% to 23.0% in FY2015. ROE increased on 6.1 pp from 26.3% to 32.4% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 1.1x and Debt / EBITDA is 1.7x. Net Debt / EBITDA dropped on 0.9x from 2.0x to 1.1x in FY2015. Debt dropped on 11.4% in FY2015 while cash jumped on 58.6% in FY2015.

Valuation

The company's trades at EV/EBITDA 7.6x and P/E 15.8x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 12.6x with the industry average at 4.7x.

Appendix 1: Peers in Healthcare Services

Below you can find Kovai Medical Center & Hospital benchmarking vs. other companies in Healthcare Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Fortis Malar Hospitals ($FORTISMLR)		13.5%	2.2%	11.1%	9.2%
Dr.Agarwal'S Eye Hospital ($DRAGARWQ)		0.7%	4.4%	4.3%	4.2%
Vimta Labs ($VIMTALABS)		-8.7%	24.9%	8.4%	-9.3%
Median (3 companies)		0.7%	4.4%	8.4%	4.2%
Kovai Medical Center & Hospital ($KOVAI)		27.3%	33.6%	12.4%	20.2%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
N.G.Industries ($NGIND)					17.9%
Vimta Labs ($VIMTALABS)	16.6%	2.1%	19.3%	22.6%	16.2%
Kmc Speciality Hospitals (India) ($KMCSHIL)					15.5%
Dr.Agarwal'S Eye Hospital ($DRAGARWQ)	12.5%	10.7%	11.0%	8.8%	10.9%
Fortis Malar Hospitals ($FORTISMLR)	14.8%	14.7%	12.5%	8.3%	6.4%
Median (6 companies)	14.8%	10.7%	12.5%	8.8%	13.2%
Kovai Medical Center & Hospital ($KOVAI)	21.1%	20.0%	23.9%	22.0%	23.6%

Top companies by CAPEX/Revenue, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Vimta Labs ($VIMTALABS)	3.4%	4.4%	3.6%	7.3%	7.1%
Median (1 company)	3.6%	4.4%	3.6%	7.3%	7.1%
Kovai Medical Center & Hospital ($KOVAI)	55.9%	34.8%	3.4%	4.5%	9.4%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Vimta Labs ($VIMTALABS)	-0.7%	-9.9%	4.7%	13.7%	5.0%
Chennai Meenakshi Multispeciality Hospital ($CMMHOSP)	6.0%	11.3%	19.8%
N.G.Industries ($NGIND)	12.2%	14.3%	13.1%
Kmc Speciality Hospitals (India) ($KMCSHIL)	0.9%	11.0%	17.6%	-9.9%
Oceanaa Biotek Industries ($OBIL)			2.8%
Median (7 companies)	6.0%	11.3%	14.5%	1.9%	5.0%
Kovai Medical Center & Hospital ($KOVAI)	14.5%	11.5%	18.0%	18.4%	23.0%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Vimta Labs ($VIMTALABS)	1.5x	10.9x	0.5x	0.2x	0.2x
N.G.Industries ($NGIND)	0.2x	-0.2x	0.8x	0.0x	0.0x
Kmc Speciality Hospitals (India) ($KMCSHIL)	6.0x	3.2x	2.3x	7.7x	0.0x
Oceanaa Biotek Industries ($OBIL)					0.0x
Fortis Malar Hospitals ($FORTISMLR)	0.6x	0.5x	-0.2x	0.0x	0.0x
Median (6 companies)	1.7x	3.2x	1.3x	0.0x	0.0x
Kovai Medical Center & Hospital ($KOVAI)	4.4x	4.5x	2.5x	2.0x	1.1x

Kovai Medical Center & Hospital stock price chart

Kovai Medical Center & Hospital financials

mln.	FY2010	FY2011	FY2012

Revenue	4,829	1,747	2,224
EBITDA	257.8	368.3	445.6
Net income	116.0	121.0	119.4
CAPEX	646.7	976.0	773.1
Debt	1,082	1,922	2,256
Cash	15.013	286.3	254.6

About Kovai Medical Center & Hospital

Kovai Medical Center and Hospital Limited provides hospital services to in-patients and out-patients in Coimbatore, India. The company operates a 750-bed multi-disciplinary advanced super specialty hospital that offers various services, including open heart surgeries, valve replacements, kidney transplants, hip and knee replacements, brain surgeries, and spine surgeries. It operates various medical facilities, which provide services related to internal medicine, KMCH heart institute, endocrinology and diabetology, health check programs, rheumatology, gastroenterology and hepatology, pulmonology, nephrology, dermatology, neurosciences, critical care medicine, obstetrics and gynaecology, fertility and reproductive medicine, neonatology, psychological medicine, haematology, and emergency. The company also operates surgical facilities that offers general/gastrointestinal/bariatric and laparoscopic, cardio-thoracic, orthopedics and joint replacement, neuro, plastic and reconstructive, cosmetic, urology, spine, pediatric, ENT/head and neck, dentistry/facio maxillary, and vascular surgeries. In addition, it operates interventional radiology and imaging sciences, nuclear medicine and PET CT, and laboratory medicine facilities; and physical medicine and rehabilitation facilities. Further, the company operates an ayurvedic wellness center, which offers various therapies, and treatments for back pain and head; and 24 hours trauma care centers and emergency care control room facilities. Kovai Medical Center and Hospital Limited was incorporated in 1985 and is based in Coimbatore, India.