FORTISNSEQ4 & FY2022May 31, 2022 Fortis Healthcare Limited
9,199words
114turns
13analyst exchanges
6executives
Management on call
Ashutosh Raghuvanshi
MANAGING DIRECTOR AND
Vivek Kumar Goyal
CHIEF FINANCIAL OFFICER – FORTIS HEALTHCARE LIMITED
Anand K
CHIEF EXECUTIVE OFFICER - SRL
Mangesh Shirodkar
CHIEF FINANCIAL OFFICER - SRL
Anurag Kalra
SENIOR VICE PRESIDENT, INVESTOR
Gaurav Chugh
CORPORATE FINANCE AND
Key numbers — 40 extracted
42%
nce business normalized. This enabled a healthy performance with a consolidated topline growth of 42% and an all-time high EBITDA of INR 1000 Crores plus. This is indeed heartening and reflects the
INR 1000 Crore
ed a healthy performance with a consolidated topline growth of 42% and an all-time high EBITDA of INR 1000 Crores plus. This is indeed heartening and reflects the efforts of all my colleagues, employees and cli
INR 5718 Crore
clearly moved on from the challenges of the past. Consolidated revenues for the company stood at INR 5718 Crores with profit after tax at a robust INR 790 Crores versus a loss of INR 56 Crores in FY2021. Our h
INR 790 Crore
Consolidated revenues for the company stood at INR 5718 Crores with profit after tax at a robust INR 790 Crores versus a loss of INR 56 Crores in FY2021. Our hospital business revenue for the year has grown 3
INR 56 Crore
ompany stood at INR 5718 Crores with profit after tax at a robust INR 790 Crores versus a loss of INR 56 Crores in FY2021. Our hospital business revenue for the year has grown 37% to INR 4264 Crores with marg
37%
es versus a loss of INR 56 Crores in FY2021. Our hospital business revenue for the year has grown 37% to INR 4264 Crores with margins improving 740 basis points to touch 15.8%. Our diagnostic busines
INR 4264 Crore
us a loss of INR 56 Crores in FY2021. Our hospital business revenue for the year has grown 37% to INR 4264 Crores with margins improving 740 basis points to touch 15.8%. Our diagnostic business has been aided b
740 basis
point
ur hospital business revenue for the year has grown 37% to INR 4264 Crores with margins improving 740 basis points to touch 15.8%. Our diagnostic business has been aided by COVID volumes and has recorded a robus
15.8%
ue for the year has grown 37% to INR 4264 Crores with margins improving 740 basis points to touch 15.8%. Our diagnostic business has been aided by COVID volumes and has recorded a robust growth of 55%
55%
5.8%. Our diagnostic business has been aided by COVID volumes and has recorded a robust growth of 55% in revenues to reach INR 1605 Crores in FY2022. Margins in the business were at a
INR 1605 Crore
ness has been aided by COVID volumes and has recorded a robust growth of 55% in revenues to reach INR 1605 Crores in FY2022. Margins in the business were at a robust 26.5% versus 19.3% in FY2021
26.5%
nues to reach INR 1605 Crores in FY2022. Margins in the business were at a robust 26.5% versus 19.3% in FY2021. Just to put the diagnostic business in perspective, high COVID volumes ar
Guidance — 20 items
“Moving ahead, I expect that our hospital business will continue to grow steadily led by the investments we have made and continue to make and with our efforts both from a strategic and operational perspective.”
“While this business has done exceedingly well in the last fiscal it would also be important to highlight the current market environment where we are witnessing an increasing level of competition from new incumbents both online and offline, in addition we also do not expect the high COVID test volume seen in FY2022 to witness the same trend in the current fiscal.”
“These have and will be continued to drive our performance in the future for all stakeholders.”
“Ashutosh Raghuvanshi: As far as the occupancy levels are concerned, we are currently tracking it about 65% and more in some hospitals, so we should aim to go towards 70% by the end of this year.”
“This may happen in the next quarter itself because we are seeing recovery happening on the international segment as well, but certainly that is the target which we are working towards.”
“10% growth in revenue, let me be greedy, so can you also share margin guidance for fiscal 2023 for the hospital business?”
“Ashutosh Raghuvanshi: In the Q3 Shyam, our EBITDA was about 16% plus and we expect to remain at that level or go higher than that.”
“Okay and the long-term guidance of us reaching 18% to 20%, Is that over a two-year that we think we can reach there?”
“Ashutosh called out that this year 18% of revenues will be at risk given that there is no wave so far, so how should we look at growth for diagnostics?”
“Currently we have reported Rs.1605 Crores of revenue in FY2022 out of which 20% is from COVID and there is about 4% to 5% contributions from COVID allied test as well to this, so overall if you can take about 25% is coming from COVID and this year we expect that the COVID contribution will range somewhere around 3% to 4% or 4% to 5% kind of range, so the revenue maybe very similar or around those range of what we have this year.”
Risks & concerns — 7 flagged
Ashutosh called out that this year 18% of revenues will be at risk given that there is no wave so far, so how should we look at growth for diagnostics?
— Shyam Srinivasan
In general, there is a cost pressure because of the inflation, as we see the inflation is going up so is the wages and other costs, transportation cost also.
— Vivek Kumar Goyal
We are able to absorb some of this cost through price increase and the mixed increase in the ARPOB as I mentioned going towards higher payers, but having said that we feel this pressure will continue going forward also and we have to figure out how to absorb this cost.
— Vivek Kumar Goyal
When you look through the next year or so where do you see some of these numbers really moving in terms of how many of these 10 hospitals will be actually seen getting into at least in the 15%, 20% bracket range and are there any specific hospitals where these kind of improvements look a lot more difficult than the others?
— Nitin Agarwal
For example the hospital in Chennai Malar one, it is having its own problem relating to infrastructure and the market-related challenge there.
— Nitin Agarwal
Sir most of my questions are answered but just one question, several of your peers have very strong balance sheets now and we have seen a lot of improvement in your balance sheet also, are there enough acquisition opportunities available or do we sort of run the risk of you overpaying for it or if you acquire hospitals that are maybe not most efficiently run then there is a pressure on your margins going ahead, how should we look at things?
— Kunal R
Ashutosh Raghuvanshi: Obviously any assets we evaluate we would look at various types of synergy and improving the performance from the base level whatever is there today and that is of prime concern.
— Kunal R
Q&A — 13 exchanges
Q
Good morning and thank you for taking my question. The first one is on the hospital business, so you said in March we have reached 60% plus occupancy if I recollect the number right, so just the outlook for fiscal 2023 in terms of where utilizations can actually improve, maybe you can make an assumption that, like you said, there is no subsequent COVID wave, so how should we look at hospital occupancy? We have had about for the full year growth, but I think Q4 was 6% so just wanted to understand occupancy plus what is the revenue growth outlook for the hospital business. I also noticed that th
Shyam Srinivasan
Revenue outlook for fiscal 2023? If I can take Shyam this question, Vivek here, so the revenue as Dr. Raghuvanshi mentioned we are hovering around 65% occupancy and this will result into the increase in the revenue side also, so definitely from the last quarter I mean Q4 of the last financial year, we are targeting around 10% growth in the revenue. 10% growth in revenue, let me be greedy, so can you also share margin guidance for fiscal 2023 for the hospital business? If you see our previous quarter, last quarter was affected because of Omicron, previous quarter we able to achieve margins of 1
Q
Thank you for taking my question. The first question is just a clarification on the diagnostic. For 2023 as you had mentioned in 2022 there is COVID testing as well as some COVID allied test happened, so in 2023 definitely what non-COVID revenue we had reported for 2022 we will see some dip in that because of that?
Anand K
Currently we have reported Rs.1605 Crores of revenue in FY2022 out of which 20% is from COVID and there is about 4% to 5% contributions from COVID allied test as well to this, so overall if you can take about 25% is coming from COVID and this year we expect that the COVID contribution will range somewhere around 3% to 4% or 4% to 5% kind of range, so the revenue maybe very similar or around those range of what we have this year. Thank you for this clarification, helpful. The next question is as you had mentioned about the guidance related to the hospital business over 10%, but you are also exp
Q
Good morning Sir and thanks for taking my question. Two questions, one pertaining to the previous participant’s question also I think the plans for the increase in the hospital beds have been really sort of tepid, so maybe not this year, but from a three years’ perspective what is the plan for Fortis in terms of the increasing the number of facilities or number of beds from where we are because earlier we were of the assumption that there is a lot of Brownfield capacity which can be undertaken within the overall system which will cause a good increase in the number of beds, but we are just tal
Vivek Kumar Goyal
First of all on the expansion side we are well on our plan for expansion, which is the guidance we have given earlier and on execution side we are on top of it. Last year also we were able to achieve 120 beds and current year there is a plan to increase another 250 beds, the beds which we are saying will be shut down is a non-profit making unit in Dehradun and we had planned to exit and we have exited. Having said that 1300 to 1500 Brownfield bed expansion is online. Out of this 1500, 600 beds is a ramp up of the existing facility so that we will be doing, the bed capacity we have built but we
Q
Thank you for taking my question. The question is in FY2022 how much operational beds we have increased?
Vivek Kumar Goyal
120 beds. At which location? One is in Shalimar Bagh and others in Arcot Road we have added, and a little bit in Ludhiana we have place like that, in Jaipur we have a place like that, so as I mentioned earlier we have around 600 beds in our system which are ready to be operationalized, but we are planning depending on the market condition, occupancy level on those hospitals and things like that. The hospital at Chennai in Vadapalani that was 250 beds, that hospital was supposed to get consolidated so that has been consolidated now? Yes, that has been operationalized but the 250 beds we have no
Q
Thank you for taking my question. Sir one question I was thinking what kind of cost pressures in general you are seeing for both your hospital and diagnostic business and are you in a position to pass that and net-net these inflationary pressures, is it like positive, negative or neutral for both the businesses?
Vivek Kumar Goyal
In general, there is a cost pressure because of the inflation, as we see the inflation is going up so is the wages and other costs, transportation cost also. For the expansion some of our equipments are imported, because of Rupee depreciation that cost is also going up. We are able to absorb some of this cost through price increase and the mixed increase in the ARPOB as I mentioned going towards higher payers, but having said that we feel this pressure will continue going forward also and we have to figure out how to absorb this cost. You would say at the margin this is negative for both the b
Q
Thanks for taking my question. Sir my question is regarding the hospital profitability metrics that you have shared, in this we have about 10 hospitals which are in the less than 15% range in fact eight of them are below the 10% EBITDA margin range and that is a reasonable chunk of our operational beds as well as revenues. When you look through the next year or so where do you see some of these numbers really moving in terms of how many of these 10 hospitals will be actually seen getting into at least in the 15%, 20% bracket range and are there any specific hospitals where these kind of improv
Nitin Agarwal
You mentioned there are about four or five hospitals which seem to be struggling, is there any thought to look at any sort of strategic options for these hospitals or they will continue to be part of our network despite these challenges? Vivek Kumar Goyal: We are evaluating all options. Ashutosh Raghuvanshi: Of course, there has to be adequate and fair effort to turnaround the problem as such, but if that is not to be then obviously the rationalization is something which we are very open to and we would take those decisions at the right time and we are evaluating how to go about it.
Q
My questions have been answered. Thank you so much.
Q
Thanks a lot for the opportunity. Sir, currently we have around 3900 beds, is that right?
Vivek Kumar Goyal
Around 4000 beds. Right, so total Brownfield and Greenfield expansion, as you said that Greenfield will be expanded by 200 beds and then there will be a Brownfield addition, am I right or I heard it wrong? Not really, we are having only Brownfield expansion program not any Greenfield right now. Okay, so that is 200 beds for next year? Ashutosh Raghuvanshi: There is one O&M project which we are going to commission in this year, but that is the beds we do not count. Right. Sir have you benchmarked on a hospital facility wise surrounding hospitals in the city or the vicinity and are there any tak
Q
Good morning and thanks for this opportunity. Sir most of my questions are answered but just one question, several of your peers have very strong balance sheets now and we have seen a lot of improvement in your balance sheet also, are there enough acquisition opportunities available or do we sort of run the risk of you overpaying for it or if you acquire hospitals that are maybe not most efficiently run then there is a pressure on your margins going ahead, how should we look at things? Ashutosh Raghuvanshi: Obviously any assets we evaluate we would look at various types of synergy and improvin
Kunal R
Sure Sir and maybe just pardon my ignorance here. I see that 21% of your hospital revenues have come from digital channel, what constitutes digital revenues here, is it mainly outpatient or was it pharmacy revenues or what exactly is it? Ashutosh Raghuvanshi: No, the digital revenues or digital channel patients could come for procedures, they could come for admission, etc. that is just we look at digital as only a channel of patient flow. Yes, there are outpatient consultations, but we do not have any pharmacy supplies or anything like that. If they are coming to the hospital and they are usin
Q
Good afternoon and thank you for taking my question. Just one question on diagnostics, you mentioned about collaborating with online aggregators. Could you shed some light on what is the difference in the margin profile on the business that you see from these digital aggregators versus your normal business?
Anand K
Thanks. We treat such opportunities as similar to how we handle our regular B2B clients, so this will be similar to that the way we handle other B2B clients. Got it, so these would also come in the 22% to 23% kind of range? Overall, it will be similar to our B2B customers so it will not be out of range. Got it and you had earlier guided for the last few quarters around 23% to 25% kind of a range for the diagnostic business. Would you stand by that guidance right now or would you like to revise that in the light of competition? I think in the last year also during our previous calls we have gui
Q
Good afternoon everyone. One quick question, to what extent does the impending Supreme Court judgment have a bearing on existing expansion plan or fundraising plans and also are there any thoughts on what the open offer price is likely to be which are going to remain at 170 or would IHH be compelled to revise it higher, would you have any clarity on that?
Vivek Kumar Goyal
This Supreme Court thing is definitely has a bearing on our fundraising ability. Having said that, we are able to raise an attractive quality bank and our rating as mentioned by Dr. Raghuvanshi in the beginning got also upgraded and we are now enjoying higher rating in short term and AA minus rating in the long term. We expect that based on the rating, there is further scope to go up. With that and status quo of Supreme Court going away will help in attracting some more quality banker and that will ultimately help us in reducing the cost. Having said that, our requirement is not much for fundr
Q
Thanks for the opportunity. Just on diagnostic side, given that the online guys are coming up with significantly lower prices and at the same time there is a good amount of traction in terms of better service to the customers, is that putting a question mark in terms of having a like physical front-end presence as a business model?
Anand K
Thanks Tushar. In fact if you have seen my presentation, we have actually grown on the walk-in front significantly compared to the previous quarter. The walk-in into the center is also significantly growing while home collection will also continue and the digital will be primarily driven through home collections, but otherwise walk-ins will continue and they will have a very good impact because the last mile connectivity is provided by these centers and so these centers will have a very key role in overall growth of the company. Got it, so volume-wise probably there is not too much of a differ
Q
Thank you ladies and gentlemen for taking the time to be with us on the call today. If there are any followup queries or questions, please feel free to reach out to Gaurav or myself, we will be more than happy to address those. Thank you once again and have a good day.
Opening remarks
Anurag Kalra
Thank you Diksha. Very good morning and good afternoon ladies and gentlemen and welcome to Fortis Healthcare's Q4 and FY2022 earnings call. The call is being chaired by Dr. Ashutosh Raghuvanshi, our Managing Director and CEO. With him we have Mr. Vivek Goyal, our Chief Financial Officer. From SRL, Mr. Anand joins us as the CEO of SRL and with him is Mangesh, the Chief Financial Officer of SRL. I am also joined by my colleague, Gaurav, over here. We will begin with some opening comments by Dr. Raghuvanshi on the performance of the quarter and the year followed by which Anand will take you through some key highlights of the diagnostics business and then we shall open the floor for question and answer. Over to Dr. Raghuvanshi! Ashutosh Raghuvanshi: Thank you Anurag. Good morning and good afternoon everyone and thank you for taking time to join us for our Q4 FY2022 earnings call. I hope all of you are safe and well in the aftermath of Omicron wave. We were all relatively fortunate that thi
Anand K
Thank you Dr. Raghuvanshi and a very good morning to everyone on the call. Personally, I hope that you are all safe and keeping well. On behalf of SRL Diagnostics I warmly welcome you all to our Q4 FY2022 results conference call. Firstly, I would like to thank you for your confidence and trust in SRL Diagnostics. I am pleased to report that we have ended the year in a strong position. This is a testament to the commitment and perseverance exhibited by our teams across the country. It has been reassuring to note that SRL's ability to consistently deliver high-standard diagnostic reports has once again been on display during the pandemic. Our 7000-member strong SRL family takes immense satisfaction in having delivered the absolute best to the citizens amidst the most challenging circumstances. The diagnostics industry has come a long way since the pandemic. It was first announced in the country in March 2020. With growing awareness on importance of laboratory testing and reliable reports