Release Date: May 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HealthCare Global Enterprises Ltd (BOM:539787, Financial) reported a 12% year-on-year revenue growth for Q4 2024, with EBITDA growth of 21%, translating to a 19% EBITDA margin.
- The company has achieved several clinical milestones, including record numbers of minimal access head and neck surgeries and rare procedures like NeuroSAFE and robotic-assisted breast-axillo thyroidectomy.
- HealthCare Global Enterprises Ltd (BOM:539787) continues to expand its state-of-the-art technology offerings, including digital PET scans, precision radiation therapy, and cutting-edge robotic surgery systems.
- The company has introduced the HCG CARE smart app suite, which has benefited over 56,000 outpatients and includes active participation from more than 300 doctors.
- HealthCare Global Enterprises Ltd (BOM:539787) has a strong focus on research and development, establishing an institutional research committee to fund investigator-initiated trials, a unique initiative in the Indian private health sector.
Negative Points
- The company's nascent centers currently have low or negative ROCE, which could impact overall financial performance.
- There has been a decline in capacity utilization from 65% to 61% due to proactive expansion and the incorporation of four new linear accelerators.
- The effective tax rate for FY '25 is expected to be between 35% to 39%, which is relatively high.
- HealthCare Global Enterprises Ltd (BOM:539787) faces challenges in ramping up new bed capacities quickly, as seen in the Ahmedabad center.
- The company has significant debt levels, with net debt excluding leases standing at INR358 crores as of March 2024, which includes acquisitions and growth CapEx.
Q & A Highlights
Q: What are the revenue growth drivers for FY '25 between new beds, ARPOB, and occupancy?
A: Our revenue growth in the past few years has been primarily driven by volume growth, which will continue. We have deployed additional capacity, increased our clinical bandwidth, and strengthened our go-to-market efforts. This will help us achieve a healthy growth rate, better than the market average.
Q: What is the outlook on margins for FY '25 and beyond?
A: The EBITDA margin in Q4 was 19%, driven by a better service mix, payer mix, and operating leverage due to strong revenue growth. We expect this trend to continue, supported by volume-led revenue growth and improved utilization of our existing capacity.
Q: How has the Indore acquisition panned out?
A: Indore was a strategic acquisition in a new market with low density of comprehensive cancer care centers. We have integrated it into HCG's platform, upgraded facilities, and strengthened our go-to-market initiatives. The progress is on track as per our integration plan.
Q: What is your beds expansion strategy for the next two to three years?
A: We plan to add about 350 to 400 beds in our existing hospitals over the next four to five years. This includes doubling our capacity in Ahmedabad and adding new facilities in Bangalore. We are also looking at M&A opportunities and may consider greenfield projects in strategic markets.
Q: What is the average life of a LINAC machine and its replacement cost?
A: The average life of a LINAC machine is about 12 to 15 years. Most new technology advancements are in software upgrades, so the basic hardware platform remains the same. The cost of replacement will depend on the specific upgrades and technology advancements.
Q: What will be the effective tax rate for FY '25?
A: The effective tax rate for FY '25 is expected to be between 35% to 39%. This is due to losses in some entities where we do not recognize deferred tax assets. Once these entities become profitable, the effective tax rate will reduce.
Q: How do you plan to grow faster than the industry, given some competitors are growing at 21% to 25%?
A: Our growth rate of 12% year-on-year is above the market average of 12%. Adjusting for the scaling down of our North Bangalore center, our growth rate is 14%. We focus on volume-led growth, which is sustainable, and continue to improve realization. We have enough levers to maintain our leadership position.
Q: Have you seen any doctor attrition due to competitors expanding?
A: Our top doctors' attrition rate is very low, less than 5%. We empower our doctors through involvement in academics and research, and we have our own training programs. This ensures a steady supply of trained doctors and maintains our status as a leader in oncology.
Q: What are the plans for the multispecialty hospitals you have?
A: We are transitioning some multispecialty hospitals to focus more on oncology. For example, Bhavnagar and Rajkot will see oncology becoming a dominant specialty. In Suchirayu, we are adding a linear accelerator and PET scan. Ahmedabad HMS will continue as a multispecialty hospital.
Q: What are your plans for debt reduction and future funding?
A: We are comfortable with our current debt levels and are exploring inorganic growth opportunities. Funding for these will come from both internal accruals and external debt. We are mindful of maintaining sustainable debt levels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
