After a strong show in March quarter, Narayana Hrudayalaya faces a soft Q1
PremiumWhile analysts remain positive on the company’s long-term prospects, near-term challenges need to be seen
Narayana Hrudayalaya Ltd reported a strong performance in the March quarter. As the continued recovery in India business drove revenues and profitability, steady contributions from Cayman Islands operations supported it well. Revenues grew 12.8% year-on-year and 11.6% sequentially.
Analysts at Kotak Institutional Equities said revenue growth was 5% ahead of their estimates, with Indian operations driving the outperformance. Easing travel restrictions aided the performance of key units, while performance of other tier-2 units improved as well. This helped drive 10% year-on-year growth in the India business, said analysts.
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The Cayman Islands business also sustained growth momentum, recording 22% year-on-year growth in constant currency. All these factors drove operating performance with consolidated earnings before interest, taxes, depreciation and amortization (Ebitda) growing 45.9% year-on-year and 36.9% sequentially.
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A strong Q4 performance helped the company end FY21 on a strong note and brought confidence on forward prospects. However, the spread of the pandemic and rise in covid cases still need to be watched for in terms of the impact on its near-term performance. The deferment of elective surgeries is likely to have a bearing on Q1 revenues and profitability, said analysts.
Though this will be compensated to some extent by rising covid-related treatment, profitability is expected to be hit.
The contribution of covid treatment to revenues in Q4 had declined to 3% vs 14% in Q3FY21, said Elara Securities (India) Pvt. Ltd. However, with increased cases, covid contributions inched up to 13% of its India business in April and even higher in May.
The India business revenue remained impacted by 7-10% in April and May compared to March, said analysts at Elara. The company is confident of recovery post-June as elective surgeries pick up. It expects a high single-digit growth at its Bengaluru flagship hospital, and low double-digit growth for the other two flagship hospitals.
While most analysts remain positive on the company’s long-term prospects and expect strong growth led by expansions, stabilizing expanded capacities, Cayman oncology addition, etc., near-term challenges in FY22 still need to be watched out for.
The return of government patients and lower ICU bed usage (especially compared to H2FY21) would adversely impact mix and average revenues per operating bed, said analysts at Yes Securities Ltd. The revival of international patients may also get delayed. Moreover, there will be some concerns over Cayman Islands revenues and profitability, too. Cayman operations are likely to moderate as travel restrictions ease, said analysts from HDFC Securities Ltd.
The analysts at Yes Securities have cut FY22 estimates by 15% and expect a more normalized year of operations in FY23.
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