Looking for fundamental growth story? Pay attention to Kovai Medical Center & Hospital

05-06-2015 • About Kovai Medical Center & Hospital ($KOVAI) • By InTwits

Pay attention to Kovai Medical Center & Hospital as a growth stock. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.

Growth story

Kovai Medical Center & Hospital showed fast growth in the last financial year. The company's revenue surged on 20.2% in FY2015. At the same time the company well managed its profitability and showed even faster growth in EBITDA of 29.2% for the same period.

In the longer period the company showed fast revenue growth of 21.8% from FY2012 to FY2015 annually. EBITDA surged on 28.6% from FY2012 to FY2015 annually.

Kovai Medical Center & Hospital ($KOVAI) financials for the last 5 years

mln. INR	FY2011	FY2012	FY2013	FY2014	FY2015
Revenue	1,747	2,224	2,971	3,340	4,014
Revenue growth, %		27.3%	33.6%	12.4%	20.2%
SG&A, %
EBITDA	368	446	710	734	949
EBITDA growth, %		21.0%	59.3%	3.5%	29.2%
EBITDA margin, %	21.1%	20.0%	23.9%	22.0%	23.6%
Net Income	121	119	204	238	385
Net Income margin, %	6.93%	5.37%	6.88%	7.12%	9.60%

CAPEX	976	773	102	150	379
CAPEX/Revenue, %	55.9%	34.8%	3.45%	4.49%	9.44%
Debt	1,922	2,256	2,082	1,836	1,627
Cash	286	255	312	349	553
Net Debt/EBITDA	4.4x	4.5x	2.5x	2.0x	1.1x

ROIC, %	14.5%	11.5%	18.0%	18.4%	23.0%
ROE, %	26.8%	21.5%	29.1%	26.3%	32.4%

Profitability and return on investment

EBITDA growth was supported by margin expansion. EBITDA margin increased on 1.60 pp from 22% to 23.6% in FY2015. If we look for the longer period Kovai Medical Center & Hospital's EBITDA margin surged on 3.60 pp from 20% in FY2012 to 23.6% in FY2015.

We call Kovai Medical Center & Hospital an attractive growth stock as together with the growth it delivers high ROIC at 23.0%. Three years ago it was considerably lower at 11.5%. It's average level of ROIC for the last three years was 19.8%.

Net Income margin surged on 2.50 pp from 7.10% to 9.60% in FY2015. In the longer period Net Income margin surged on 4.20 pp from 5.40% in FY2012 to 9.60% in FY2015.

Kovai Medical Center & Hospital operates at ROE of 32.4%. It's average ROE for the last three years was 29.3%.

Capital expenditures (CAPEX)

To fuel this fast growth Kovai Medical Center & Hospital had to invest in CAPEX.In FY2015 the company had CAPEX/Revenue of 9.44%. CAPEX/Revenue dropped on 25.3 pp from 34.8% in FY2012 to 9.44% in FY2015. Average CAPEX/Revenue for the last three years was 5.79%.

Leverage (Debt)

Kovai Medical Center & Hospital has medium debt level at 1.1x Net Debt/EBITDA to maintain high growth. If we look for the longer period Kovai Medical Center & Hospital showed big decline in leverage of 3.36x from 4.49x in FY2012 to 1.13x in FY2015.

Valuation vs. comparable companies

The company trades at 7.4x EV/EBITDA which is 46.7% lower than 13.9x Healthcare Services industry avearge calculated based on 25 companies. The market closed today at 15.5x P/E for Kovai Medical Center & Hospital which is the same as 15.5x Healthcare Services peer group avearge calculated on the basis of 1 company.

For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The market closed today at 12.3x EV/(EBITDA-CAPEX) for Kovai Medical Center & Hospital which is 552% higher than 1.9x Healthcare Services peer group avearge calculated on the basis of 1 company.

Peers in Healthcare Services

Below we provide Kovai Medical Center & Hospital benchmarking against other companies in Healthcare Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

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.