Krishna Institute of Medical Sciences Ltd. share price target

We have BUY on the stock

Krishna Institute of Medical Sciences’ (KIMS) Q2FY24 was a tad better than our expectations. EBITDA margin at 27.2% was better than expected as commercialisation of new hospital under Sunshine was postponed to Nov’23 (Aug’23 earlier). Rise of 10.6% QoQ in-patient footfall fuelled 600bps surge in occupancy to 76.4%, while ARPOB was down 2% QoQ due to change in case mix.

Capacity expansion and stabilisation of acquired assets to drive growth

The industry-wide occupancies in Telangana and Andhra Pradesh are currently experiencing a downtrend owing to an oversupply of beds, with a fourfold increase over the last three years. This trend is evident from the performance of players such as KIMS, Apollo, and Aster DM in the previous quarter.

Krishna Institute of Medical Sciences’ (KIMS) Q1FY24 sequential revenue growth of 5.2% was mainly driven by ARPOB improvement of 3.7% while occupancy and OPD consultations were largely flat. As guided by the management, Telangana belt margin normalised to ~31% due to surge in overheads and seasonality while addition of gastro unit in Andhra Pradesh (AP) dented margins of that belt.

Krishna Institute of Medical Sciences’ (KIMS) Q4FY23 performance was driven by robust performance in Telangana region. Revenues from Telangana hospitals surged 5.5% QoQ while EBITDA margin expanded 473bps to 35.1%.

Company Outlook & Guidance: The overall industry' occupencies in Telangana and AP are in downtrend due to over supply of Beds (4x in last 3 years), which are reflected by players like KIMS, Apollo and Aster DM in the last quarter.

Capacity expansion and stabilisation of the acquired assets to drive growth