Narayana Hrudayalaya Ltd

There are multiple things that are sitting right in front if someone is careful enough to look.
NH can become too big as per my understanding. Below are my thesis pointers:

1. Upcoming capex is concentrated in Bangalore and Kolkata where they already have a significance presence, so ramp up won’t be an issue and this will be high in margin.
2. Gurgaon is positive and Mumbai is almost positive now, so bleed is not there and this should be able to further drive margins.
3. Cayman new facility shouldn’t face any ramp up issues because they already have a presence there.
4. I studied this in details last month only and I thought that they are just sitting on a goldmine in terms of in house softwares for hospitals. This can be ramped up as SaaS entity separately and this will be a very high margin biz. and looks like company has decided to capitalize this. In latest AR they mentioned about 6-7 in house softwares. This can be a goldmine.

Above pointers should play out in next 3-5 years.
Thereafter, I imagine Gurgaon would be reporting 15-20%+ margins and next expansion phase can come from here.

Insurance biz. and clinic biz. is going to be a very long term play and as per my understanding this is not going to be fruitful in near to medium term because it’s like a network effect and takes time to progress. I’m very curious about the clinic biz. because I think this can be a game changer for the company and can help company to penetrate into new geographies without setting up full fledged hospital and also it can help reduce the initial pain that hospitals have to go through to ramp up.

Anti-thesis:

1. Margin pressure should come in from Cayman end. Also, need to cautiously see the market size of Cayman and market around Cayman which company wants to enter.
2. Not sure of the impact of Insurance biz. on margins.
3. Company’s venture NHIC is bleeding as of now.
4. Need to watchout for improvement in Gurgaon and Mumbai margins as these facilities have been performing below expectations, there’s a question that of how long they’ll take to reach Bangalore or Kolkata margins or can they even reach those margins?

Disc: Not Sebi registered, Invested and biased.