Yatharth Hospital & Trauma Care Services Ltd
Quality Healthcare At Affordable Price
Yatharth hospital is a large private multi-speciality tertiary care hospital operating in the regions of North India. The group have a network of four hospitals currently in operation (Noida, Noida Extension, Greater Noida and Jhansi-Orchha) with a total bed capacity of 1405 beds as of Dec 2023, and in Feb 2024, it acquired a hospital in Faridabad which will be operationalised in Q1FY25.The company plans to double its bed capacity to 2800 beds in next five years. We like Yatharth due to 1) Good healthcare at affordable pricing 2) expanding its presence in underpenetrated markets such as Noida 3) focusing to improve its therapy offerings (Addition of radiation and oncology block) which will result in superior case mix thus improving the ARPOB and 4) Lean cost structure due to limited dependence on star doctors which will result in improvement in EBITDA margins. Also, the company has single large hospital model wherein they build a large 400-500 bed hospital in a single unit leading to operating leverage benefits. Going ahead, as the occupancy improves, the operating leverage would play out resulting in higher margin. We forecast EBITDA CAGR of 21% over FY24E-FY26E. We assign 20x EV/EBITDA on FY26E EBITDA and arrive at a target price of Rs 658 per share, translating into an upside of 42% and hence, we assign Buy rating on the stock.
One of the largest players in Delhi NCR
Yatharth is one of the largest hospital chain in the corporate healthcare sector in Delhi NCR with 1100 beds, first being Max Healthcare with 3400 beds. The area’s substantial per capita income of Rs. 243,100 and a low bed density of 2.7 per 1000 people underscore a significant shortage of hospital beds. Yatharth capitalizes on this scenario, leveraging its operational bed share and competitive pricing to secure and maintain its leadership in the competitive healthcare landscape.
Headroom to grow in home market
Yatharth holds a strong brand positioning in Noida. By leveraging its brand, it can achieve higher sales merely by improving its occupancy and expanding in current market only. Low bed density (2.7 per 1000 people) in its core Delhi-NCR market allows it to remain focused in this market. Unlike, other peers such as KIMS and Medanta, which are exploring into other market, Yatharth plans to expand in its home market only which reduces the execution risks.
Affordable Pricing Model
Yatharth have successfully implemented its affordable pricing model in the hospitals in Tier 1-2 markets, even though hospitals in different markets face different competitive landscapes and pricing pressures. Yatharth serve patients from different economic backgrounds and offer a different mix of specialty offerings. In Tier 1 cities, the prices across medical procedures are on average 10% to 20% lower than other private hospitals in Delhi NCR. This helps to attract high inpatient volume.
Focusing on improving the case mix
Company’s 33% of revenues comes from Internal medicine (lifestyle diseases like diabetes, cough, cold, fever, and dengue) which has a low ARPP. To improve the ARPOB, the company is adding radiation therapy and organ transplant in two of its hospital which would lead to higher ARPOB and ARPP for the company. Currently, the company has ARPOB of Rs. 26,538 in FY23, going forward we expect it to grow at a CAGR of 4.5% from FY23-FY26E on the back of improved case mix and price hike.
Robust return ratios
Yatharth has one of the best return ratios amongst its peers in the range of 20%-22%. Going ahead, these return ratios will be maintained as major capex is through brownfield only which means growth will be achieved without diluting the ROE.
Valuation is in comfort zone
Currently, the stock is trading at comforting valuation on FY26E EV/EBITDA of 13.8x. Yatharth’s story aligns with KIMS, as both employ a cluster-based approach, prioritize affordable healthcare, and sustain strong EBITDA margins. Yet, a notable difference arises – Yatharth’s stock is presently trading at a 35-40% discount compared to KIMS. Given Yatharth’s significant growth opportunities in its local market and its pledge to increase revenue without sacrificing return ratios, there’s a clear sign that the gap in valuation is likely to wane in the coming times. We value the stock at 20x and arrive at target price of Rs. 658 per share which offers upside of 42% from current valuations. Therefore, we assign BUY rating on the stock.
Leave a Reply