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Thermal Power production is set to increase. Just look at thermal capex for NTPC. Others will also boost capex as govt realizes they need steady long-term power at fixed rates year-round. Only thermal provides this. Just see changes in govt thinking over last 2 years. Coal India are themselves doing a project near one of their mines.
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Coal gasification will increase to get fertilizer feedstock. see latest subsidiary which is formed.
Posts in category Value Pickr
Curious Case of Coal India (02-06-2024)
See the bright Sun: Aditya Vision (02-06-2024)
Reliance/Croma opening stores in Tier 3 cities of south-west India is like Vijayapura, Vadodara, Solapur is more like Tier 2 of Bihar like Gaya and Muzaffarpur, from operating skill perspective. Whereas Aditya vision has stores in all districts in Bihar and going to sub-division level. So their penetration level is deep. Very difficult for a national player to operate at that level as they will always look at going deeper in south-west first as operating challenges are lower and they have more bandwidth at state level in those states.
Another point about online threat apart from obvious touch and feel difference. Now most white goods companies are offering slight variation in models online and offline. So that they don’t cannibalize offline sales by comparison. If you buy something offline and search for same model online you are not likely to find it. There will be model with same capacity/size. It can be exactly same (not sure) but model number will not match.
This is a big moat in fastest growing and second most populous state.
See the bright Sun: Aditya Vision (02-06-2024)
Reliance/Croma opening stores in Tier 3 cities of south-west India is like Vijayapura, Vadodara, Solapur is more like Tier 2 of Bihar like Gaya and Muzaffarpur, from operating skill perspective. Whereas Aditya vision has stores in all districts in Bihar and going to sub-division level. So their penetration level is deep. Very difficult for a national player to operate at that level as they will always look at going deeper in south-west first as operating challenges are lower and they have more bandwidth at state level in those states.
Another point about online threat apart from obvious touch and feel difference. Now most white goods companies are offering slight variation in models online and offline. So that they don’t cannibalize offline sales by comparison. If you buy something offline and search for same model online you are not likely to find it. There will be model with same capacity/size. It can be exactly same (not sure) but model number will not match.
This is a big moat in fastest growing and second most populous state.
My portfolio updates and investment journey (02-06-2024)
Portfolio Update:
My asset allocation to equity shall go up. I shall strive to bring equity to up to 60% in coming months. Unfortunately I am not able to bet big on equity side given the run up of last few years (last one years big bet was only Nuvama). I trimmed bond portfolio wherever liquidity was available.
The older bets where I was big I was booking profits. For example: Nuvama in last update was 17% of portfolio, now its at 13%. Complete exit on Pricol led to some cash accretion as well. I allocated some of the Pricol and Nuvama money to Sandhar, and R&D bucket created in the last 2-3 months.
I do not feel I am in full control of my portfolio as I sprayed around money on R&D buckets and some shallow work (Sudarshan). I hope to streamline the portfolio over this quarter.
Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more, exit or partly sell the stock/bonds without any prior intimation . Also note that I recently joined a investment advisory firm. My portfolio is not a recommendation for anyone. Some of these stocks might be in clients portfolio as well so please be aware of vested interest.
My portfolio updates and investment journey (02-06-2024)
Portfolio Update:
My asset allocation to equity shall go up. I shall strive to bring equity to up to 60% in coming months. Unfortunately I am not able to bet big on equity side given the run up of last few years (last one years big bet was only Nuvama). I trimmed bond portfolio wherever liquidity was available.
The older bets where I was big I was booking profits. For example: Nuvama in last update was 17% of portfolio, now its at 13%. Complete exit on Pricol led to some cash accretion as well. I allocated some of the Pricol and Nuvama money to Sandhar, and R&D bucket created in the last 2-3 months.
I do not feel I am in full control of my portfolio as I sprayed around money on R&D buckets and some shallow work (Sudarshan). I hope to streamline the portfolio over this quarter.
Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more, exit or partly sell the stock/bonds without any prior intimation . Also note that I recently joined a investment advisory firm. My portfolio is not a recommendation for anyone. Some of these stocks might be in clients portfolio as well so please be aware of vested interest.
Policybazaar – Insurance Online (02-06-2024)
Management revised its guidance of profits to 1470 crores by FY27. https://www.moneycontrol.com/news/technology/hurts-when-people-dont-understand-we-turned-profitable-without-cutting-expenses-pb-fintechs-yashish-dahiya-12253671.html
Also note that management somewhere said that once they reach the said target their bottomline will still grow at 40-50% rate. I have done my own work: My portfolio updates and investment journey - #147 by joinjp2003 when market cap of pb was 50,000 crores.
There are risks: regulatory, new initiatives etc.
Disclosure: I own the stock, ~14% of portfolio. May have transacted in last 30 days.
Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more, exit or partly sell the stock/bonds without any prior intimation . Also note that I recently joined a investment advisory firm. My portfolio is not a recommendation for anyone. Some of these stocks might be in clients portfolio as well so please be aware of vested interest.
My portfolio updates and investment journey (02-06-2024)
Thanks @aditya14920251 .
@Krishna19 in additiion to what Aditya mentioned please do check the break-up of depreciation. Many a times amortisation is also clubbed with it.
Within depreciation for red flags please check whether company is disposing off assets fast. If life of asset is ~10 year and company disposes those assets in substantially less time than its a red flag.
Please check the break-up of assets to understand what is being written-off and/or disposed off. Many companies may write off computers, equipments etc faster and may buy them too much to write them off again (basically a red flag).
One of the company i recently invested has ~200 crores of sofware/database capitalised (out of total assets of ~600-700 crores) and they amortise ~25-30 crores annually. I am not able to understand that if that is something I need to worry. So my allocation in this stock is negligible as of now. Also management is not doing any concalls so that to understand it better.
Senco Gold: Upcoming gold story! (02-06-2024)
Q4 FY24
Financials and Business
- Competition by fellow jewellers to capture the growing market and the new demand is the reason margins are under pressure. Offers and discounts are being given which are driving the margins down
- The inventory increase is because of new stores and gold price increasing, nothing to worry about
- Inventory days stable at 2.41x
- A lot of growth in Q3 came because of extended wedding days, rising gold prices and Akshaya Trittya.
- Average blended sales per store is 35 to 36 crores whereas its 27 in north. There is room for growth.
- Exports last year was 70 and this year 180 crores. This led to fall in margins because the margins are lower in exports around 6-7%( not too big of a difference)
- Out of 1500 crores, 915 crores is gold metal loans which has an interest of 3.2-3.8% and wc funding rate is 9.8% and blended comes to 6-6.5%
- Average Sale price is 41,000 which was 36,000 in the last 3 years. ATV also increased to 63,000 from 57,000 in last 3 years. It is important to note that this is the blended ASP and Gold Jewellery ASP are higher by Rs 9,000- to Rs 10,000.
- Repeat buyers were around 47-53%
- 35% of revenue should be franchise while 60% should be own. Balance from ecommerce etc.
Stores and SSSG
- Store count: 159, 23 were opened and out of which 17 were COCO.
- This year they entered the central market by entering Bhopal and Indore.
- They already had a store in Raipur and now increased another one there.
- The franchisees have been more focused on the Eastern India expansion while our journey of opening new stores, building the brand, getting our awareness levels high across the country has been focused on East, North and Central India.
- We opened one store in the South in Bangalore as well, and one store in Pune.
- the focus of 60% to 70% of your store openings be its own store or franchisee will be Eastern and Northern part of the country and 20% more so, will be on the Southern and Western part of the country. So, 70% to 80% Eastern and North, out of that again 40% to 50% is going to be East only, because we believe that there is still our scope in all the Eastern India states of Bihar, Odisha, Bengal, Assam, Chhattisgarh and further on to penetrate into the tire two, three, four towns and cities or the growing fact of the capital cities of East India also.
Outlook
- The current year margin of 7.2% can become 8% in the future
- 18-20% growth in topline and bottom line grow 15-20%
- Add 10 COCO and 10 franchises in FY25, thats the goal. Its a conservative goal
- Stable profitability in the coming 4-5 years when market share consolidated and organised players have taken over most of it.
- Increase GML loans year on year to save interest costs. Rn it’s at 60% and FY25 the goal is to make it 75%. If this happens, the cost of borrowing can be 4.85%
- Margins will be a cause of concern because the competitive intensity will increase and they said it will be mitigated by increasing stud ratio
- A conservative approach of Margin improvement would be 30 basis points year on year.
- SSSG will be 60/70% of the growth which is what ensures operating leverage.
Gold exchange
- 32% of overall business is gold exchange, it was 25% two years ago.
Diamond and gold prices
- Stud ratio for FY24 grown from 10.4% to 11.4%
- The increase in gold prices is leading to lighter jewelry being worn which has more diamonds.
- There is some inelasticity of demand because customers have to buy for the bride during the wedding irrespective of the price. So that has helped a lot for them and the ATV or average total value of wedding has increased.
- Even though the prices have been on the upward trend has been seen and even if we look at the trend in the last two months with a big jump in the gold prices, it is this wedding Jewellery collection and the wedding Jewellery purchases that is showing a bigger traction compared to the lighter Jewellery sales
- Stud ratio in north is 17.2%
- A 100 basis point plus increase in stud ratio will lead to upward pressure on margins so if they achieve the same number like FY24, all else equal the margins will increase.
My thoughts:
I am quite happy with the results. A concern will be margins going ahead because the competitive intensity is here to stay. However, improving stud ratio is key and that depends on north stores mainly so let’s see how that goes.
Apart from that, a 20% guidance seems good and a little conservative. 20 stores being added+ SSSG can lead to higher growth but I am modeling my expectations with a 20% increase in topline.
the reason I think that COCO stores guidance aren’t as many FY24 is because of the emphasis on capturing TIER 2,3,4 cities which is mainly done by franchises.
Moreover, interest costs are at 2% of total revenue and with the increase of GML loans, I expect them to gradually fall and maybe fall to around 1.5% or so in the next 2-3 years.
Operating leverage aided by SSSG seems intact.
good quarter
Narayana Hrudayalaya Ltd (01-06-2024)
Q4 FY24 Concall
Financial Performance
- Revenue and Profitability:
- Highest ever revenue and profitability margins for FY 2024.
- Q4 consolidated revenue: INR 12,794 million (4.7% YoY growth, 6.3% QoQ growth).
- Q4 consolidated EBITDA: INR 3,184 million (24.9% margin, up from 23.8% in Q4 FY 23).
- FY 24 consolidated revenue: INR 50,183 million (10.9% YoY growth).
- FY 24 consolidated EBITDA: INR 12,275 million (24.5% margin).
- HCCI Cayman Performance:
- Q4 revenue: USD 30.5 million (3.1% YoY growth).
- FY 24 revenue: USD 123.9 million.
- FY 24 EBITDA: USD 58 million.
Balance Sheet and Liquidity
- Strong Liquidity Profile:
- Group cash and liquid investments: INR 12.58 billion.
- Gross borrowings: INR 14.41 billion.
- Net debt position: INR 1.84 billion (as of 31st March 2024).
- Net debt to equity ratio: 0.06.
- Capital Outlay:
- Capital expenditure: Over INR 9 billion for hospital transformations, repairs, biomedical expenses, and greenfield projects.
Clinical Achievements
- Health City Bangalore:
- 19 TAVIs, 19 robotic cardiac surgeries, and 255 Minimal Invasive cardiac surgeries in Q4.
- Over 1000 Minimal Invasive cardiac surgeries in FY 24.
- 16 solid organ transplants and 89 robotic surgeries in Q4.
- Bone preservation surgery with 3D printed model and ovary preservation surgery for ovarian cancer.
- RN Tagore Hospital Kolkata:
- Trans-axillary Perceval Plus Suture-less aortic valve replacement using Central Cannulation technique (first in the country).
Digital Transformation
- Digital Initiatives:
- Launch of comprehensive purchase model on ATHMA platform for supply chain management.
- Launch of ‘Namah’ nursing app in February, saving 5000 person hours.
- Over 95,000 discharge summaries certified via ‘Aadi’ mobile app.
- 19.73% increase in lab throughput through ATHMA Lab Information System.
- Patient kiosks introduced in three hospitals.
- Narayana Health app monthly active users: 200,000+ with a 4.8 rating on Google Play Store.
Business Expansion and Growth
- Narayana Health Integrated Care:
- Q4 revenue: INR 68 million (highest so far).
- Over 43,250 patient transactions.
- Focus Areas:
- Upgrading clinical and non-clinical operations.
- Transforming patient service levels.
- Increasing throughput and building more capacity.
- Investing in digital patient outreach channels.
- Improving operational efficiencies.
India Business Performance
ARPOB Increase and Discharge Decline
- ARPOB (Average Revenue Per Occupied Bed): Increased by almost 10%.
- Discharges: Declining trend across the network.
- Reasons:
- Comparison with a high base from post-COVID rush in Q4 FY 23.
- Infrastructural transformations, including changes in bed configurations to private and semi-private rooms, reducing peak admission bed availability.
- Focus on payor segments, leading to improved IP average revenue per patient (highest level of INR 1.31 lakh).
- Anticipation of volume rationalization correction over time.
Revenue Growth Outlook
- Historical Revenue Growth: 14-15% per annum, which is unsustainable.
- Recent Growth: 4-5% growth in the last two quarters.
- Future Expectations:
- Focus on efficiency, capacity utilization, payor mix, and digital initiatives.
- Aim to achieve double-digit revenue growth until expansions are completed.
Cayman Business Performance
Q4 Revenue Growth
- Q4 Revenue: Weak growth observed.
- Reason:
- Near commissioning of the new hospital, limiting the addition of new services and capacity.
- Expected growth post-commissioning with 3-4 new service lines.
New Hospital Commissioning
- Inauguration: Scheduled for July.
- Patient Treatment Start: Early August, subject to inspections and compliance sign-offs.
Average Revenue Per Patient
- Q4 Decline: From USD 35.3k to USD 29.1k.
- Reason:
- Change in case mix with fewer high-end, high-complexity specialties as revenue grows.
- Shift to specialties and services with lower revenue per patient but higher volume and viable business.
- Transition to more daycare and short-stay procedures expected to continue this trend.
- Long-term Outlook: Focus on overall revenue growth rather than quarterly fluctuations.
Bed Expansion Plans
Focus Areas
- Primary Locations:
- Bangalore: Major expansion focus.
- Kolkata: Significant but secondary focus compared to Bangalore.
Specific Projects
- Health City Campus, Bangalore:
- Expansion on existing land.
- Over 300,000+ square feet construction.
- Mix of rooms, ICUs, OTs, multi-level car parks, and state-of-the-art setup.
- Rajarhat, Kolkata:
- New land acquired.
- 300,000+ square feet construction to start by mid-Q3 FY 25.
- Land Acquisition Cost: INR 180 crores including registration.
- Capital Employed: Estimated INR 1,000 crores for a 1,000-bed facility over ten years.
- Construction Timeline: Expected to be operational by FY28.
- Break-Even: Anticipated within 2-3 years post-construction.
- Additional Bangalore Location:
- Recently acquired land in upmarket area.
- Construction to commence within 5-6 months.
- Future Greenfield Projects:
- Shortlisting land parcels in focus cities where Narayana Hrudayalaya currently lacks presence.
Total Construction Area
- Overall Expansion: More than 800,000 to 1,000,000 square feet of new construction starting from mid to end of Q3 FY 25.
Financial Investments
Capital Expenditure
- FY 25 Greenfield Capex: Estimated at INR 1,000 crores.
- Includes expansion projects and new constructions.
- Routine Biomedical and Maintenance: Additional INR 300 crores.
- New Cayman Facility: Additional INR 250 crores in the final stage.
Timeline and Capacity
- Construction Start: Mid-Q3 FY 25.
- Online Beds: Expected within 2-3 years, closer to 3 years.
Cayman Islands Operations
Outpatient Increase
- Outpatient Volume Growth: Increased from 7,000 to 10,000.
- Impact on Inpatient Services: Expected to translate into higher inpatient volume over time.
- Day Care Focus: Emphasis on endoscopy, colonoscopy, CTs, MRIs, and pharma sales, classified under outpatient services.
Insurance Business Expenses
Current Quarter P&L
- NHIC and NHL Expenses: Combined expenses of INR 11.5 crores.
- Main Expense: Majority directed towards the clinics business.
Jaipur Unit Operations
Insurance Procedure Issues
- Current Status: Ongoing discussions with the state government.
- Operational Adjustments: Shift from medical management to procedural and surgical patients.
- Surgical Count Increase: Significant rise in surgical procedures.
- Revenue Recovery: Recovered approximately INR 1 crore of the lost revenue.
- Performance Metrics: 12% growth in top line and over 40% increase in EBITDA compared to Q3.
Growth and Base Impact
Base Comparison
- High Base Impact: Last year’s high base affects current growth projections.
- Future Projections: Difficult to estimate; post-COVID catch-up growth might normalize in the next 2-3 years.
Capacity Constraints
- Bottlenecks: Current growth is limited by capacity, not demand.
- Infrastructure Expansion: Significant infrastructure projects and expansions are underway to alleviate constraints.
Demand Dynamics
- Unmet Demand: No shortage of demand; investments in outreach, clinics, and insurance programs to attract patients.
- Revenue Broadening: Focus on increasing outpatient and preventative services, similar to the Cayman Islands model.
Sectoral Impact
Economic Slowdown
- Impact on Healthcare: Minor impact from economic cycles (e.g., wedding season, festivals) but generally minimal due to healthcare’s essential nature.
- Long-Term Demand: Sustained by population growth, aging population, and increasing healthcare needs.
Cayman Islands Operations
Expansion Details
- Current Capacity: 110 beds.
- Future Capacity: Additional 60 beds.
- Focus on Daycare Services: Emphasis on daycare and throughput rather than just bed count.
Profitability Improvement in Lesser Profitable Units
Key Hospitals
- Gurugram: Transitioned from break-even to EBITDA positive.
- Mumbai (SRCC): Achieved single-digit positive EBITDA.
- Dharamshila: Consistently achieving double-digit EBITDA margins.
Combined Performance
- EBITDA Margin: Around 9% combined.
- Revenue Base: 115 crores for the quarter.
Drivers of Improvement
- Clinical Infrastructure: Enhanced clinical capabilities and specialties.
- Volume Growth: Increased volumes and occupancy have helped spread costs.
- Focus on NCR: NCR is a major focus for expansion and consistent performance.
Future Margin Improvement
- Dharamshila: Consistently over 15% EBITDA margin with potential for growth.
- Gurugram: Stabilized and consistent, with continued consolidation expected.
Funding of Capex
Total Capex
- Budgeted Capex: Over INR 1,600 crores for the coming year.
Funding Mix
- Internal Accruals: Approximately 20%.
- Debt: Approximately 80%.
Debt Details
- Current Gross Debt: INR 1,400 crores (India + Cayman).
- Projected Gross Debt: Expected to increase to around INR 2,400 crores with planned borrowing.
- Net Debt: Expected to be around INR 1,200 crores in the worst case.
Cash Utilization
- Cash on Hand: Approximately half of the gross debt.
- Cayman Cash: Significant cash parked in Cayman Islands, not ideal for repatriation to India due to tax implications. Exploring opportunities to invest Cayman funds outside India.
Historical and Future Capex Utilization
Recent Capex
- Past Two Years: Approx. INR 1,000 crores each year.
- Focus: Improving throughput and capacity within existing hospitals.
Future Growth Potential
- Short-Term: Continued growth within existing capacity through efficiency improvements and small additions.
- Medium-Term: Major expansions to come online in the next 2-3 years, driving significant growth.
Tax Rate
Current and Future Tax Rates
- Current Year: 15.5% due to deferred tax credit benefit from rate transition.
- Next Year: Expected average tax rate of 26% for India business; Cayman business at zero tax.
Cayman Islands Expansion
New Hospital Impact
- Revenue Growth: Expected increase in revenue post-commissioning.
- Margin Dilution: Anticipated margin dilution due to fixed costs of the new hospital until break-even is achieved.
Operational Costs
- Cost Structure: Costs related to the building’s size are consistent, but operational staffing and costs will vary.
Choice of Indicator
- Preference for ARPP:
- Provides a more accurate reflection of realization per patient.
- Less susceptible to manipulation compared to ARPOB.
- Reflects the evolving trend towards daycare procedures and outpatient services.
Rationale
- Shift in Medical Field:
- Daycare procedures increasingly common, occupying beds without inpatient status.
- ARPP aligns better with changing healthcare landscape.
Differentiation of Narayana Services
Geographic Coverage
- Cutting-Edge Services for All:
- Narayana offers advanced treatments regardless of patient’s paying capacity or class.
- Example: High usage of robotic procedures, even for non-cancer surgeries.
Outcome Monitoring
- Stringent Outcome Monitoring:
- Emphasis on closely monitoring outcomes to ensure quality and value for patients.
- Ensures patients receive the best-in-class care and outcomes.
Pricing Strategy
Predictable vs Unpredictable Procedures
- Package Pricing vs Open Billing:
- Package pricing for predictable clinical pathways provides clarity to patients.
- Open billing for unpredictable procedures.
Competitive Pricing
- Lower Prices Compared to Competitors:
- Narayana’s prices generally lower due to high predictability of procedures.
- 80%-90% of procedures have predictable costs, offering clarity to patients.
Supreme Court’s Observations on Cost Procedures:
- A judge’s remark highlighted the need to assess the implementation of the Clinical Establishments Act across states, suggesting the enforcement of CGHS rates if necessary.
- Stakeholder discussions ensued, involving government officials, State Health Ministers, and Industry Associations, addressing the practical challenges of establishing a uniform pricing standard.
- Concerns were raised about the impracticality of imposing uniform pricing, emphasizing the importance of differential pricing to cater to the diverse economic demographics of India.
- The focus shifted towards promoting transparency in billing practices across all healthcare sectors, acknowledging the societal importance of meeting patient needs and expectations at various price points.
Occupancy Levels and Capacity Utilization
- Current Occupancy:
- Occupancy levels around 60%.
- Historical peak occupancy reached 75%-78%.
- Difficult to define a theoretical limit due to dynamic nature of healthcare services.
Margins and Profitability Outlook
- Short-Term Margins:
- Cayman hospital expected to be dilutive initially.
- Indian hospitals may not fully offset Cayman’s impact.
- Cost inflation impacting margins despite efficiency gains.
- Medium-Term Margins:
- Improved throughput and performance may positively impact margins.
- Medium-term margin improvement anticipated.
- Timeline: 18 to 24 months.
Daycare Services and Revenue Growth
- Annualized Revenue Growth:
- Outpatient revenue growth at approximately 14%, including Daycare services.
- Value of Services:
- Emphasis on delivering high-value services through Daycare procedures.
- Improved throughput by conducting procedures with same-day discharge.
Expansion Plans for Outpatient Capacity
- NHIC Entity:
- Establishment of Narayana Hrudayalaya Integrated Care (NHIC) for clinic expansion.
- Each clinic involves a moderate investment of 1-2 crores.
- Targeting 20-30 clinics per year to enhance outpatient capacity.