Tag - consumers

29 Sep

Hospitals seeing a 20% plus Return on Capital Employed – Max Healthcare

 

Update on the Indian Equity Market:

On Wednesday, NIFTY closed 0.2% lower at 17,711. Top gainers in NIFTY50 were NTPC (+6.4%), COALINDIA (+6.2%), and POWERGRID (+6.7%). The top losers were HDFC (-2.1%), KOTAKBANK (-1.8%), and ASIANPAINT (-1.8%). The top gaining sectors were PSU (+2.7%), METAL (+2.3%), and PHARMA (+1.7%) while the top sectoral losers were PRIVATEBANK (-1.1%), FINANCIAL SERVICES (-0.9%), and FMCG (-0.6%).

Hospitals seeing a 20% plus Return on Capital Employed – Max Healthcare

Excerpts of an interview with Mr. Abhay Soi, chairman and managing director at Max Healthcare, aired on CNBC TV18 on 28th September 2021:

  • Hospitals are making 20 percent plus ROCE while receiving less than 1% of their income from COVID patients. At the current operating rate, the firm is generating free cash flows of around Rs 1,1000 million.
  • The chairman indicated that a x% rise in revenue would improve free cash flows by roughly 2x%. He also stated that the firm will generate Rs 50 -60 mn in internal accruals alone over the next four to five years.
  • The business’s present debt levels are lower than its EBITDA from the 2QFY22, and the company hopes to be debt-free by the 3QFY22. Over the following four to five years, the business intends to leverage its balance sheet to two times debt to EBITDA.
  • The Company plans to expand its capacity in Gurugram, by building a 500-bed hospital in the next three to four years, at a budget of Rs. 35bn. At the moment, their hospitals are roughly 78% full. The deployment of funds would be limited to brownfields and greenfield, as well as some light asset models. The business has no plans to do Mergers & Acquisitions in the hospital space.
  • The company intends to do acquisitions in the diagnostic space. In the Delhi NCR region, which has a population of 40 mn people it is currently the third biggest diagnostic chain.
  • When speaking about retail business in terms of economic value and volume the company ranks 3rd or 4th in the country.

Asset Multiplier comments:

  • We believe Max is entering a high growth phase led by expansion at Saket (Delhi) and Nanavati (Mumbai). It’s solid balance sheet and production of operational cash flow are anticipated to support organic and inorganic efforts.
  • With a robust development strategy and a positive outlook for the retail sector, we believe Max Healthcare is well-positioned to capitalize on the opportunity in the Indian hospital market for offering quality healthcare services across the country.

 

Consensus Estimate: (Source: market screener, investing.com websites)

 

  • The closing price of Max Healthcare was ₹ 356/- as of 29-September-2021.  It traded at 47x/37x/34x the consensus earnings estimate of ₹ 7.0/9.6/10.5 for FY22E/23E/24E respectively.
  • The consensus price target is ₹ 385/- which trades at 35x the earnings estimate for FY24E of ₹ 10.9/-

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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28 Nov

Bata to use multi-channel retail strategy to reach more customers: Sandeep Kataria, CEO, Bata India

Update on the Indian Equity Market:

On Wednesday, NIFTY50 closed 0.5% higher. NIFTY50 gainers include Yes Bank (+8.3%), Ultratech Cement (+3.1%), and SBI (+2.9%). NIFTY50 losers include Infratel (-3.2%), Cipla (-2.2%), and L&T (-1.7%). Realty (-0.6%) and Media (-0.4%) were the only losing sectors while PSU BANK (+1.8%), Auto (+1.3%), and Metal (+0.9%) were the top gaining sectors.

Excerpts from an interview with Mr Sandeep Kataria, CEO, Bata India, published in the Economic Times dated 27th November 2019:

  • Bata will continue its growth journey in India with the multi-retail channel approach along with the e-commerce platform to reach out to as many customers as it can.
  • The company has a retail network in 450 towns and wishes to further expand by adding new stores in smaller towns through the franchise route.
  • Bata has been using three engines – a) their own stores, b) franchise partner store, which is a big drive for them in tier III & IV, and c) multi-brand outlets.
  • To add to all this is their E-commerce channel, whether through their own website or through other marketplaces, that helps them to get as many customers as they can.
  • The Company will strengthen its presence by adding 500 stores in the next five years, focusing mainly on small markets as it has identified tier II, III and IV cities where it has plans to broaden its sales network through the franchise model.
  • India is much bigger and Bata’s brand image is also bigger. So, they have decided to expand their reach to as many Indians and take advantage of their equities.
  • Online channels are providing opportunities in multiple ways to reach consumers. Bata can use digital channels to increase the productivity of their stores and enhance the satisfaction of their consumers.
  • Bata is working hard to reconnect with the country’s millennials. Bata India has a whole battery of brands in Bata as North Star, Bata Red Label, Marie Claire and Footin which talk to millennials. The Company does not have to rely on Bata as the main brand.
  • When asked whether Bata has any plans to introduce new brands from its global fold, Mr Kataria said the Company is not very keen to do that as there is a huge opportunity for them to play with the brands which they have here. The Company has a license for the manufacture and sale of several global brands as Hush Puppies and Naturalizer. Bata has introduced outdoor brand shoes from Caterpillar in its top selected outlets this season.

Consensus Estimate (Source: market screener website)

  • The closing price of Bata India Ltd was ₹ 1,615/- as of 27-November-19. It traded at 52x/ 44x/ 36x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 30.8/ 36.9/ 44.3 respectively.
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