Strong operating performance in Q1 led to 52% y-o-y increase in EBITDA to R528 million and 19% y-o-y growth in revenue to R4.5 billion. ARPOB (Average Revenue Per Occupied Bed Day) increased 12% to R19,725/ day due to a richer case mix. ALOS (Average Length Of Stay) reduced to 4.1 days, freeing up more capacity, whereas overall occupancy rate improved 315 bps y-o-y to 55%.
We believe Narayana Hrudayalaya (NH) is entering a strong growth phase, as capacity utilization ramps up and new beds get added. We expect occupancy to improve to 65% over next 3 years. As bulk of capex is over, we expect 20% revenue CAGR coupled with 450 bps improvement in EBITDA margin to 16% (as utilization improves) over FY16-20.
While immediate upside is capped, we believe, the stock can compound at ~15% given earnings are back-ended and 3x increase in EBITDA to R5 billion expected by FY20. Maintain hold with DCF based TP of R325 (implies 22x FY18E EV/ EBITDA).
The company commissioned a 230 bed super-specialty hospital at Katra, Jammu, which is witnessing good traction across operating parameters. Performance of its associate company in Cayman Islands has picked up well. The company achieved operating revenue of $ 7 million (up 157% y-o-y).