[ad_1]
By Karan Vora
Max Healthcare Institute Ltd (NS:): Max’s Q3 proforma EBITDA came broadly in line at ~INR3.6bn, led by all-time-high ARPOBs and decent volumes on the back of continued momentum in the core business, despite a seasonally weak quarter. With a multitude of short and long-term growth drivers (international business, improvement in payor mix, and expansion plans) in place, we expect Max’s EBITDA to grow at ~15% CAGR over FY22-FY28e. Despite the aggressive expansion plans, we expect post-tax RoCEs to stay at ~17-22% levels through FY28e. We tweak our FY23/24 estimates by 1%/-2%, to factor in encouraging overall outlook and arrive at a SOTP TP of INR430/sh, based on ~24x FY24e EBITDA. Maintain BUY.
Fine Organic Industries Ltd (NS:): Our BUY recommendation on Fine Organic Industries (FOIL) with a target price of INR 4,380 is premised on (1) constant focus on R&D, (2) diversified product portfolio, (3) capacity-led expansion growth opportunity, and (4) leadership in oleo-chemical based additives in the domestic and global markets with a loyal customer base. Q3 EBITDA/APAT was 13/13% above our estimates, owing to a 25% rise in revenue, lower-than-anticipated depreciation, offset by higher-than-expected raw material cost, and higher-than-expected tax outgo.
KNR Constructions Ltd (NS:): KNR posted a strong Q3FY22 financial performance with revenue/EBITDA/APAT at INR 7.7/1.6/0.9bn, beating our estimates by 11/10/4%. The order book (OB), as of Dec-21, stood at INR 100bn (~3.7x FY21 revenue). The order inflow (OI)/revenue guidance for FY22 stands at INR 60/31bn. In the quarter, KNR transferred 49% of its stake in two HAM projects to Cube Highways for INR 2.4bn (1.17x P/BV), with INR 1bn expected by Jun-22, when the remaining stake is transferred. KNR turned net cash with zero debt and cash and cash equivalents are at INR 4bn, as of Dec-21. The NWC days came down to 40 from 45, as of Sep-21. KNR expects NHAI to open tenders for roads and highway construction in Q1FY23. We maintain BUY with an increased TP of INR 360 (18x Dec-23E EPS, HAM 1x P/BV). We have increased our FY22/FY23/FY24 EPS estimates by 0.4/2.1/3.6% on the back of better margins and lower interest costs.
Ahluwalia Contracts (India) Ltd (NS:): Ahluwalia Contracts (AHLU) reported revenue/EBITDA/APAT (miss)/beat of (4)/(1)/7%. AHLU is confident of crossing INR 25bn+ in revenue for FY22, backed by an order backlog (OB) of INR 67bn and an L1 of INR 7bn. 15% of the OB is fixed-price contracts and exposed to price volatility. However, variable contracts are not fully immune in the short term with WPI based pricing for some materials like aluminium. The total order inflow FYTD has been INR 12.7bn, with INR 20/25bn expected for FY22/23. AHLU is witnessing greater competitive intensity in bidding, which it expects would reduce by H1FY23. It is seeing a larger number of big-ticket projects getting tendered, making qualification difficult for smaller players. On the back of this factor and expectation of stable raw material prices, FY23 revenue growth is pegged at 20% YoY with an EBITDA margin of 12%. AHLU has 4.7acres of land parcel in the hub of Kolkata and primarily intends to dispose it off. Also, the idea of residential development on it is not discarded yet. We maintain BUY with a reduced TP of INR 522 (13x multiple; Dec-23E EPS).
Capacite Infraprojects Ltd (NS:): Capacite Infraprojects’ (CIL) execution continues to remain muted. Restrictions on the CIDCO project’s Vashi package led to INR 400mn lower revenue booking; from Jan-22, the restrictions have lifted and execution has restarted. The order book (OB) stood at INR 84.7bn (9.6x FY21 revenues, ex of INR 43.5bn MHADA order), as of Dec-21, with almost a 100% price inflation pass-through clause. CIL maintained its guidance of becoming debt-free by Sep-23. In the quarter, CIL’s credit rating was upgraded from IND ‘D’ to investment grade IND ‘BB’. Post further upgrades (CIL guidance – ‘A’ by Q1FY23), the margin requirement for BG and CC accounts may be lowered by ~5%, which will free up some cash. Additionally, the performance bank guarantee (PBG) requirement for government and private projects has come down, which will again release cash. Cumulatively, CIL expects INR 900mn retention release (next six months) and INR 1.2bn cash margin release over the next two years. We cut our EPS to factor in delays in handing over of INR 18bn of the CIDCO project site. Reiterate BUY with reduced TP of INR 232/sh.
Max Healthcare
In-line quarter
Max’s Q3 proforma EBITDA came broadly in line at ~INR3.6bn, led by all-time-high ARPOBs and decent volumes on the back of continued momentum in the core business, despite a seasonally weak quarter. With a multitude of short and long-term growth drivers (international business, improvement in payor mix, and expansion plans) in place, we expect Max’s EBITDA to grow at ~15% CAGR over FY22-FY28e. Despite the aggressive expansion plans, we expect post-tax RoCEs to stay at ~17-22% levels through FY28e. We tweak our FY23/24 estimates by 1%/-2%, to factor in encouraging overall outlook and arrive at a SOTP TP of INR430/sh, based on ~24x FY24e EBITDA. Maintain BUY.
- Hospital business showing encouraging trends: Hospital revenue grew ~4% QoQ to INR12.6bn (adj. for vaccine revenue), led by all-time-high ARPOBs (+3% QoQ, improved payer mix) and decent volumes, despite a seasonally weak quarter. Barring international business (55-60% of pre- COVID in Q3), the company is operating at pre-pandemic levels with non- COVID beds accounting for ~99% of total occupied beds (vs. ~60% in Q1). While Q4 occupancies are expected to dip marginally, Max remains confident of maintaining 75%+ occupancy levels (among industry-best) on a sustained basis. With international business recovering and improvement in payor mix, we believe the company is well-poised to improve its core hospital EBITDA margin profile, from ~26-27% currently.
- Max Labs – non-COVID business stabilizing: Lab revenue came in at INR220mn (flat QoQ). However, the non-COVID business share went up to ~86% (vs. ~82% in Q2), mainly led by the expansion of service coverage (24+ cities now vs. ~20 in Q2) and the addition of channel partners (added ~90 in Q3, ~700 in total). The addition of channel partners, centers, and one-off expenses on the new website launch weighed on the EBITDA margin in the quarter.
- Further acquisitions announced; strong balance sheet and CFs provide headroom for growth: The company announced further expansion plans with ~300 beds to be added in Dwarka on an asset-light model and commissioning a 400-bed hospital (250-beds in phase-1) in East Delhi (near Patparganj) to go along with earlier announcements of Vikrant foundation (Saket) and Gurugram greenfield expansion. Given the strong CF generation on the cards (management expects INR13-15bn OCFs p.a.), Max aims to fund most of the Capex requirements (~INR40bn over 4-5 years, ~40-45% of cumulative OCFs) through internally-generated CFs. With an adj. net debt/ EBITDA of ~1x in FY22e, the company has enough capacity to leverage the balance sheet that provides potential headroom for growth.
- Con call takeaways: (a) Nanavati: VRS phase-1 successfully completed, savings of INR90mn p.a. with an estimated payback period of less than ~2 years; (b) Expansion plans – to add ~2,800 beds over FY22-27e with an estimated outlay of ~INR40bn (incl. ~INR5bn for land); (c) 2-3% price hikes annually (would be higher in this year).
Click on the PDF to read the full report:
[ad_2]
Source link
