Q2 Con Call highlights- 11 Nov 2022
- Introduced Ethos as a new technology COE in Banglore.
- One of the few centres in the world using this AI-based technology. It continues to probe and treat infected tumours using AI.
- Fellowship programme is top-rated, and students are willing to relocate to Tier 2/3 cities to learn.
- HCG and Milann’s revenue contribution is 96:4
- Mature centre revenue grew 19%, and emerging centres revenue grew by 26% YOY
- ARPOB- mature centre- 39684, emerging centres- 30,145. QOQ de growth in the emerging centre is due to a higher proportion of institutional business, which will come down in the future.
- Mature centre ROCE 24.8% and emerging centre ROCE 4%
- 5 Cr on consultancy- improve productivity and digital transformation. Both these initiatives shall help 100-150 EBITDA improvements next year. Have similar expenses in the H2 and this will disappear from next year.
- Hired Big Four firms to look into consulting on operational efficiencies, market dynamics, pricing, and labour productivity.
- When HCG open a new hospital, the first objective is to utilise different aspects of hostility. Hence we take the institutional business. This shall normalise going forward.
- Playbook for opening hospital
- Open hospital
- Drive football
- Boost occupancy (by the institutional business, for example)
- Higher utilisation across different segments
- How much time it takes to generate a margin of 15%?
Kolkata centre starred last year. Breakeven early next year, and then it will move to a margin upwards of 15% - Revenue split- Consultation and diagnostic- 20%, medical oncology(e,g Chemo)- 35%, radiation oncology 20%, surgical 25%.
- 13 centres are in non-metros- 11 out of them have #1 position in the market- lower operating costs, and serve the institutional business to drive up the volume. Hence our EBITDA are same for metros and non-metros. Unique business model. ROCE 15-24%.
- Ahmedabad, Bangalore- mature centres- 75,000 ARPOB. Baroda, Mumbai, Kolkata, around 50,000. Once they mature, their ARPOB will inch upwards to other mature centres.
- Six/Seven quarters ago, emerging centres were operating at -8% operating margin; today, they are operating at 10% operating margin.
- In the next 18/24 months, emerging centres PAT will be similar to mature centres (aspiration). This can result in a 300-400 point increase in profitability.
- For an 80-bed hospital- the cost per bed- metro is 65-70 lakhs, non-metro 55 - 60 lakhs
- Current tax rate is 35% and moving to 25%, possibly from next year.
- Focus in on Cancer super speciality. Some existing multi-speciality centres and moving them to super speciality.
- CVS PE fund owns 58%. Invested a couple of years back. No talk of exit yet
- On Maintenance contract- It seems asset-light model at the start. When the centre starts making money, partners like to do it themselves (e.g Apollo), so they are not looking into this. There is good opportunities in setting up dedicated Oncology centres. May be capital intensive at start but sustainable.
- ARPOB is a function of high-end work, complex work and a speciality mix.
Note: Invested and special thanks for @Worldlywiseinvestors for explaining hospital/HCG in details in his various videos.
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