Robotic-assisted Surgeries And MRI-guided Focused Ultrasound Will Improve Future Patient Care

Key Takeaways

• Expansion into new regions and partnerships could drive revenue growth and enhance market share through increased capacity and service offerings.
  
• Investments in advanced medical technologies and high-demand specialties could improve revenue per patient and elevate overall margins.
  
• Various regional challenges, including project delays and write-offs, negatively affect short-term profitability, cash flow, and net margins.

Catalysts

Provides medical and health care services under the KIMS Hospitals brand name in India.

• Opening of new hospitals in Guntur, Thrissur, and Bangalore, adding significant bed capacity and expanding geographic presence, which could drive revenue growth in new markets.
  
• Implementation of advanced medical technologies, such as MRI-guided focused ultrasound and robotic-assisted surgeries, potentially leading to higher revenue per patient due to premium pricing for advanced treatments.
  
• Strategic partnerships and acquisitions, like the agreement with VIMS in Kerala, enhancing capacity and service offerings, thereby increasing potential revenue streams and regional market share.
  
• Significant investments in oncology and mother and childcare services, which are high-demand specialties, expected to elevate the overall revenue and possibly improve margins due to specialized offerings.
  
• Anticipated operational improvements and ramp-up in new and acquired facilities, such as Nashik breaking even within a year, which could boost future earnings and improve EBITDA margins.

Krishna Institute of Medical Sciences Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Krishna Institute of Medical Sciences's revenue will grow by 26.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 12.1% today to 13.5% in 3 years time.
• Analysts expect earnings to reach ₹7.8 billion (and earnings per share of ₹19.36) by about March 2028, up from ₹3.5 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 50.4x on those 2028 earnings, down from 67.9x today. This future PE is greater than the current PE for the IN Healthcare industry at 36.1x.
• Analysts expect the number of shares outstanding to decline by 0.15% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.53%, as per the Simply Wall St company report.

Krishna Institute of Medical Sciences Future Earnings Per Share Growth

Risks

• Seasonal impacts and one-off provisions have led to a decline in EBITDA for certain clusters, like the Maharashtra cluster, impacting the overall profitability and net margins.
  
• Delays in project execution, such as in Bangalore, can lead to deferred revenue realization and increased holding costs, affecting net margins and earnings.
  
• Fresh hiring has increased corporate overheads, and though there is no clear expansion of costs across the board, it weighs on short-term profitability and net margins.
  
• The need for ongoing loss funding for new projects (e.g., hospitals in Thane and Bangalore) until they reach operational break-even negatively affects short-term earnings and cash flow.
  
• Write-offs and adjustments, particularly in regions like Nagpur, have previously impacted profitability and may continue to do so, affecting net income and margins.

Valuation

• The analysts have a consensus price target of ₹696.077 for Krishna Institute of Medical Sciences based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹783.0, and the most bearish reporting a price target of just ₹622.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹58.1 billion, earnings will come to ₹7.8 billion, and it would be trading on a PE ratio of 50.4x, assuming you use a discount rate of 12.5%.
• Given the current share price of ₹590.5, the analyst price target of ₹696.08 is 15.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.