Kovai Medical Center & Hospital reports 86.9% CAPEX growth in 2016 and 15.9% Revenue growth

28-05-2016 • About Kovai Medical Center & Hospital ($KOVAI) • By InTwits

Kovai Medical Center & Hospital reported FY2016 financial results today. Here are the key drivers of the company's long term financial model:

Kovai Medical Center & Hospital is a fast growth stock: FY2016 revenue growth was 15.9%, 5 year revenue CAGR was 21.6% at FY2016 ROIC 20.6%
Kovai Medical Center & Hospital has high CAPEX intensity: 5 year average CAPEX/Revenue was 13.5%. At the same time it's in pair with industry average of 15.2%
CAPEX is quite volatile: ₹708m in FY2016, ₹379m in FY2015, ₹150m in FY2014, ₹102m in FY2013, ₹773m in FY2012
The company has highly profitable business model: ROIC is 20.6%
It operates with high leverage: Net Debt/EBITDA is 1.2x while industry average is 0.2x

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

Revenue and profitability

Kovai Medical Center & Hospital's Revenue surged on 15.9%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 2.4 pp from 18.5% to 20.9% in FY2016.

Net Income margin decreased slightly on 0.87 pp from 9.6% to 8.7% in FY2016. Net Income margin grew at 0.94 pp per annum in FY2012-FY2016.

Investments (CAPEX, working capital and M&A)

The company's CAPEX/Revenue was 15.2% in FY2016. CAPEX/Revenue surged on 11.8 pp from 3.4% in FY2013 to 15.2% in FY2016. Average CAPEX/Revenue for the last three years was 9.7%. To maintain its fast growth the company invested a large share of EBITDA (76.8%) to CAPEX. During the last 5 years CAPEX as a % of Revenue bottomed in FY2013 at 3.4% and was growing since that time.

Return on investment

The company operates at high and attractive ROIC (20.6%) and ROE (26.1%). ROIC decreased on 2.4 pp from 23.0% to 20.6% in FY2016. ROE decreased on 6.3 pp from 32.4% to 26.1% in FY2016. During FY2012-FY2016 ROIC topped in FY2015 at 23.0%.

Leverage (Debt)

Debt level is 1.2x Net Debt / EBITDA and 1.7x Debt / EBITDA. Net Debt / EBITDA increased on 0.033x from 1.1x to 1.2x in FY2016. Debt decreased on 2.6% while cash decreased on 7.7%. Net Debt/EBITDA declined at -0.8x per annum in FY2012-FY2016.

Kovai Medical Center & Hospital has no short term refinancing risk: cash is higher than short term debt (135.9%).

Financial and operational results

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

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	2,224	2,971	3,340	4,014	4,653	15.9%
EBITDA	446	710	734	949	921	-2.9%
Net Income	119	204	238	385	406	5.4%
Balance Sheet
Cash	255	312	349	553	511	-7.7%
Short Term Debt	221	287	295	351	376	7.1%
Long Term Debt	2,035	1,794	1,541	1,276	1,208	-5.3%
Cash flow
Capex	773	102	150	379	708	86.9%
Ratios
Revenue growth	27.3%	33.6%	12.4%	20.2%	15.9%
EBITDA growth	21.0%	59.3%	3.5%	29.2%	-2.9%

EBITDA Margin	20.0%	23.9%	22.0%	23.6%	19.8%	-3.8%
Net Income Margin	5.4%	6.9%	7.1%	9.6%	8.7%	-0.9%
CAPEX, % of revenue	34.8%	3.4%	4.5%	9.4%	15.2%	5.8%

ROIC	11.5%	18.0%	18.4%	23.0%	20.6%	-2.4%
ROE	21.5%	29.1%	26.3%	32.4%	26.1%	-6.3%
Net Debt/EBITDA	4.5x	2.5x	2.0x	1.1x	1.2x	0.0x

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	FY2012	FY2013	FY2014	FY2015	FY2016
Fortis Malar Hospitals ($FORTISMLR)	-	2.2%	11.1%	9.2%	9.9%
Dr.Agarwal'S Eye Hospital ($DRAGARWQ)	0.7%	4.4%	4.3%	4.2%	-
Vimta Labs ($VIMTALABS)	-	24.9%	8.4%	-9.3%	16.3%
Median (3 companies)	0.7%	4.4%	8.4%	4.2%	13.1%
Kovai Medical Center & Hospital ($KOVAI)	-	33.6%	12.4%	20.2%	15.9%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
N.G.Industries ($NGIND)	-	-	-	17.9%	-
Vimta Labs ($VIMTALABS)	2.1%	19.3%	22.6%	16.2%	-
Kmc Speciality Hospitals (India) ($KMCSHIL)	-	-	-	15.5%	-
Dr.Agarwal'S Eye Hospital ($DRAGARWQ)	10.7%	11.0%	8.8%	10.9%	-
Fortis Malar Hospitals ($FORTISMLR)	14.7%	12.5%	8.3%	6.4%	4.7%
Median (7 companies)	10.7%	12.5%	8.8%	10.9%	4.7%
Kovai Medical Center & Hospital ($KOVAI)	20.0%	23.9%	22.0%	23.6%	19.8%

Top companies by CAPEX/Revenue, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Vimta Labs ($VIMTALABS)	4.4%	3.6%	7.3%	7.1%	-
Median (1 company)	4.4%	3.6%	7.3%	7.1%	-
Kovai Medical Center & Hospital ($KOVAI)	34.8%	3.4%	4.5%	9.4%	15.2%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Vimta Labs ($VIMTALABS)	-9.9%	4.7%	13.7%	5.0%	-
N.G.Industries ($NGIND)	14.3%	13.1%	-	-	-
Secunderabad Healthcare ($SECHE)	0.2%	-0.1%	-	-	-
Chennai Meenakshi Multispeciality Hospital ($CMMHOSP)	11.3%	19.8%	-	-	-
Oceanaa Biotek Industries ($OBIL)	-	2.8%	-	-	-
Median (8 companies)	11.3%	14.5%	1.9%	5.0%	-
Kovai Medical Center & Hospital ($KOVAI)	11.5%	18.0%	18.4%	23.0%	20.6%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Vimta Labs ($VIMTALABS)	10.9x	0.5x	0.2x	0.2x	-
N.G.Industries ($NGIND)	-0.2x	0.8x	0.0x	0.0x	-
Secunderabad Healthcare ($SECHE)	48.3x	99.8x	-	0.0x	0.0x
Kmc Speciality Hospitals (India) ($KMCSHIL)	3.2x	2.3x	7.7x	0.0x	-
Oceanaa Biotek Industries ($OBIL)	-	-	-	0.0x	-
Median (7 companies)	3.2x	1.3x	0.0x	0.0x	0.0x
Kovai Medical Center & Hospital ($KOVAI)	4.5x	2.5x	2.0x	1.1x	1.2x

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.