Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aster DM Healthcare Ltd (BOM:540975, Financial) achieved a 20% year-on-year growth in revenues to INR1,000 crores for Q1 FY25.
- Operating EBITDA grew by 38% to INR177 crores, with the EBITDA margin expanding to 17.6% from 15.3% a year ago.
- Net profit post-NCI increased by 80% to INR74 crores, driven by operational excellence and interest earned on investments.
- The company added nearly 450 beds over the last year, contributing to revenue growth.
- Aster DM Healthcare Ltd (BOM:540975) plans to add approximately 1,700 beds by FY27, increasing the total bed count to 6,500 beds.
Negative Points
- The company faces challenges in talent acquisition and retention, particularly in Tier 2 and Tier 3 cities.
- There is a significant dependency on the Indian market, which may pose risks if the market conditions change.
- The EBITDA margin for the O&M asset-light model hospitals is lower compared to the core hospitals.
- The company has a high promoter pledge, which it aims to reduce by the end of the financial year.
- There are ongoing investigations related to a whistleblower complaint about conflicting business activities and related party transactions.
Q & A Highlights
Q: Your margin has gone up almost like 200 bps plus. Going forward, what are the chances that margin can improve further as some of your capacity is going to be matured?
A: With respect to margin enhancement, our mature hospitals, which are more than six years in operation, have an operating EBITDA of 23.2%. As more hospitals mature, we expect consolidated margins to increase from the current 17.7% to 20-21%, and specifically, the core hospital and clinics segment could reach 23-24%.
Q: Regarding the CapEx program for adding 1,700 beds, what is the approximate cost for a brownfield project?
A: The overall CapEx for the 1,700 beds is around INR 1,200 crores, with INR 200 crores already incurred. For brownfield expansions, the cost per bed is approximately INR 50 lakh.
Q: Can you explain the ARPOB growth drivers for the quarter?
A: ARPOB growth was driven by a reduction in ALOS, a shift in payer mix, and the full operation of Aster Whitefield Hospital, which now has an ARPOB of INR 70,000. Price increases contributed around 3-3.5%, and there was also an increase in high-end procedures like robotic surgeries.
Q: What is the approach to selecting whether a new hospital will be owned or leased?
A: The decision depends on geography and revenue model. We aim for capital-efficient and high-return investments. For example, Aster Whitefield Hospital was set up at INR 76 lakh per bed on a lease model, whereas a greenfield project would have cost INR 2-2.5 crores per bed.
Q: What are the plans for reducing promoter pledge, which is currently around 98.87%?
A: Efforts are underway to reduce the pledge, with a goal to significantly lower it by the end of the financial year. The high percentage is due to the structure of an overseas loan, but the actual loan amount is much smaller.
Q: How do you see the ARPOB moving in the next 3-4 years?
A: We expect ARPOB to grow at 7-8% annually, driven by a mix of price increases (around 3-3.5%) and case mix improvements. The current ARPOB is INR 44,000, and we see room for growth, especially in non-metro areas.
Q: What are the top 2 drivers for absolute EBITDA growth in each cluster over the next 3 years?
A: In Kerala, growth will come from brownfield expansions and manpower optimization. In Karnataka and Maharashtra, new assets like Aster Whitefield will drive growth, along with occupancy improvements. In Andhra and Telangana, the focus is on increasing margins to mid-teens and eventually closer to 20%.
Q: Can you provide more details on the whistleblower complaint?
A: The complaint is related to conflicting business activities and related party transactions that were not properly disclosed. The financial impact is not significant, but we are conducting a deeper investigation to uphold high governance standards.
Q: What is the CapEx per bed in non-metros?
A: For greenfield projects in non-metros, the cost is around INR 1-1.5 crore per bed. For brownfield or leased projects, the cost is around INR 70-75 lakh per bed.
Q: How do you see the blended margins evolving over the next 3-4 years?
A: We expect consolidated margins to increase from the current 17.7% to 20-21%. Specifically, the hospital and clinic segment, currently at 20.8%, could reach 23-24% in the next 3-4 years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
