Max Healthcare Institute Ltd.

About Of Max Healthcare Institute Ltd.

Company operations in the year 2000 with our first hospital, Max Medcentre in Panchsheel Park, and expanded our operations by opening various multi-speciality hospitals and entering into arrangements with societies and trusts. Company provide healthcare services across secondary and tertiary care specialities with key focus on centres of excellence i.e. oncology, neurosciences, cardiac sciences, orthopaedics, renal sciences, liver and biliary sciences and minimal access metabolic and bariatric surgery (“MAMBS”).

Max Healthcare is the second largest healthcare chain in India by revenue with a network of 17 Healthcare Facilities, including BLK Super Speciality Hospital and Nanavati Super Speciality Hospital (post de merger of Radiant’s healthcare business into our Company). Our network includes four Partner Healthcare Facilities, to whom we provide healthcare services in key specialities pursuant to prevailing agreements. We have major concentration in north India with eight hospitals and five medical centres located in Delhi NCR and the others in the cities of Mumbai, Mohali, Bathinda and Dehradun.

In addition to the core hospital business, Company have two SBUs, namely, Max@Home and MaxLab. Max@Home is a platform that provides health and wellness services at home and MaxLab offers pathology services to patients outside of our hospitals through a variety of channels including third party hospital laboratory management.

Company reaffirmed our position as Centres of Excellence for Oncology, Neurosciences, Cardiac

sciences, Orthopaedics and Transplants across North India. Company are currently running the largest Oncology programme in North India and the largest Bone Marrow transplant programme in Asia.

 Max Heathcare the  first to volunteer a 200-bed hospital in Delhi and 150 beds hospital in Mumbai, as COVID-19 facilities. Company now have over 950 beds dedicated to treatment of COVID-19 patients and have so far treated 3800 COVID-19 patients. Further, company launched homecare services and also offered treatment at partner hotels for mild COVID-19 patients. Were one of the first private sector hospital labs to offer COVID-19 testing and have conducted over 50,000 tests, pioneered the first successful convalescent plasma treatment for COVID-19 in India and are currently conducting 40 research projects related to COVID-19.

Company innovated to create a digital home-monitoring service which got a very enthusiastic response.

KEY STRENGTHS

- Leading Hospital Brand

Hometrail Buildtech Private Limited (HBPL)

Nanavati Super Speciality Hospital, Mumbai

Max Smart Super Speciality Hospital, Delhi

Alps Hospital Limited (Alps)

Crosslay Remedies Limited (CRL)

Saket City Hospitals Private Limited (SCHPL)

BLK Super Speciality Hospital

Rediant Life Care Pvt. Ltd.

- Growth Opportunity In Existing Facilities

Hospitals currently operate at an average occupancy of ~72% (FY20). This gives us significant headroom to grow in the near term without incremental capex. Further, there is an opportunity to improve profitability by optimising the speciality and payor mix.

- Extremely Valuable Land Bank For Future Expansion

Company have access to very valuable land bank in the heart of both Delhi and Mumbai with the potential to build 1,700 beds alongside existing facilities. This coupled with the possibility of adding beds in existing facilities takes the total brownfield expansion potential to ~2,300 beds across our network facilities. These land banks offer expansion opportunity with lower capex, faster time to market and no ramp up period leading to high return on incremental capital employed.

- Ability To Build On Capital Light Adjancies

Max Healthcare can leverage its established brand and clinical expertise to create and build on asset light adjacencies. Currently, Company non-captive pathology business, under the MaxLab brand, offers diagnostics services to patients outside Max Hospitals through 100+ collections centres, 120+ phlebotomists at site, 130+ pick up points and 15+ hospital lab management contracts. In last 3 years, it has achieved 8X revenue growth to become the third largest player in NCR, driven by 350+ active partner network across both B2B and B2C channels. Its hub and spoke model for retail business offers opportunity for cost efficiency and rapid scale up. Similarly, home healthcare SBU, Max@Home, provides high quality continued care at home through its 12 service offerings including critical care nursing, physiotherapy, x-ray at home etc. Since, inception in FY17, it has also grown 8X in revenue to become the largest provider of home healthcare services in the region. Going forward, we plan to build on these two platforms and continue exploring other capital light adjacent opportunities.

Covid-19: Global Pandemic

Company decided to take the lead in dealing with the pandemic. It was the first Indian private hospital chain to offer (directly or indirectly through its subsidiaries or other network hospitals) a completely dedicated facility in Delhi and Mumbai for COVID-19 patients. It was also one of the first few private labs to start Reverse Transcription Polymerase Chain Reaction (RT-PCR) testing. Your Company also took the lead in treatment and was the first to do the convalescent plasma therapy trial for the critically ill patients.

Financial Highlights

During the year, the company undertook a very successful performance improvement plan. The margins improved from 11.6% in Q1FY20 to industry leading 16.8% in Q4FY20, while maintaining the highest standards of medical quality and improving service experience for the patients.

Performance Highlights 

The Company took care of nearly 14 Lakh patients in FY 2019-20 (on standalone basis). Medical value travellers from over 97 countries contributed to international revenue of INR 100 crores, constituting 9.3% of your Company’s revenues.

Revenue from key clinical specialities (i.e. Cardiac sciences, Orthopaedics, Neuro-sciences, Liver & Biliary Sciences, Oncology, MAS and Renal) has improved by 11.6% as compared to last year and share of Centres of Excellence has increased from 58.8% in FY 2018-19 to 61% in FY 2019-20.

This led to an improvement in average revenue per occupied beds by 5.6% to INR 48,207 in FY20 compared to the previous year.

These initiatives led to the increase in bed occupancy for FY 2019-20 to 74.2% as compared to 73.4% in the FY 2018-19 on the same number of operational beds. Average Length of Stay (ALOS) based on IP Volume discharge also improved from 4.80 in FY 2018-19 to 4.71 in FY 2019-20. The Inpatient Average Revenue Realized (ARR) improved by 8.8% while the hospital ARR improved by 5.6% during FY 2018-19.

The Company grow in FY19-20 by 11.4%. We are expected that company will grow by

FY20-21 by 12.87% .The operating profit before interest and depreciation was INR 180.30 Crores, increase of 118.3% as compared to FY 2018-19. The cash profits were INR 90.50 Crores, 1.6x increase over the previous year, a part of this is also due to accounting for leases under Ind AS 116. Net Profit stood at INR 25.06 Crores, as compared to loss of INR 23.38 Crores in the previous year.

The company improved the performance,Company invested in newer technology for its Neurosciences department by introducing Intra-Operative CT and O-Arm. New high-end CT has also been ordered for its network facility in Saket. However, the work on new Max Medcentre for Immigration and Wellness at Mohali has been delayed due to lockdown.

MAX@HOME

The out-of-hospital business division of  Company provides quality, accessible, continued care at home. The services cover preventive and pre and post-hospitalization care including critical care or ICU at home, assistance based services (nursing & health attendant), rehabilitation & physiotherapy, diagnostics, medicine delivery, nursing procedures, medical equipment, doctor home visits and onsite medical rooms amongst others.

Since its inception in FY17, Max@Home has scaled up to become the largest provider of home healthcare services in the region with most comprehensive suite of in-house services.

During FY20, Max@Home registered 22% YoY growth in topline at ~ INR 77 Crores with healthy growth across all key service lines. During the period, customer satisfaction scrores - administered through a third party for the business stood at 88% T2-B2, up from 81% in FY19. The scrores reflect very well upon the quality of service delivery that is essential given the nature of services yet are difficult to achieve given remote, distributed workforce and logistics heavy operations.

In FY20, the Quality and Accreditation Institute (QAI) accredited Max@Home. QAI is the only certifying body for home healthcare in India and is a member of the ISQua (International Society for Quality in health care)

MaxLab

MaxLab is a business vertical of Company offering diagnostics services to patients outside its hospitals.

During the year, MaxLab clocked net revenue of INR 59 crores. The B2B segment clocked INR 40.5 crores with 67% growth, while INR 18.5 crores is from pathology serviced by Max@Home team. The B2B business growth is led by addition of partners and the team has added over 222 partners, taking the total partner count to over 600. The team has served over 5.6 Lakhs patients during the year, up 80% from 3.2 Lakhs in last year. MaxLab also operationalised five new hospital lab implants in the year. The business also added Company Owned Company Operated (COCO) Collection centres with start of four new centres in different parts of NCR. These centres are well received and also act as operational Hubs to service the partners’ network in their region.

The collection centres were also audited along with pathology labs and full audits were conducted for South Delhi, Gurgaon, East Delhi, Mohali regions. MaxLab intends to be the first lab with 100% coverage of collection centres as per NABL guidelines.

Since launch, MaxLab has been successful in establishing its presence in NCR, Uttarakhand, and Punjab with support of 600+ partners and has plans to expand operations to cover entire North India in near future.

Subsidary Companies / Joint Ventures /Associates

Hometrail Buildtech Private Limited (100%)

Alps Hospital Limited (100%),

Crosslay Remedies Limited (77.95%)

Saket City Hospitals Private Limited (57.20%) 

Radiant Life Care Mumbai Private Limited (99.99%)

MGHL was incorporated on May 20, 2019 under the Companies and Allied Matters Act 1990 (of Nigeria), as a wholly owned subsidiary of the Company. However, share subscription money has not been invested in MGHL till March 31, 2020. MGHL was incorporated in line with the international strategy of your Company to expand its operations in Nigeria.

Valuation Analysis

 A BUY position is recomended for this company with a target price of ₹330 per share as per using DCF, Exit Multiple and Relative Valuation.

Note :

This Report is only for Education Purpose only & Should not be used for investment & any other Reason.

 

 

 

 

Date : 16 Dec 2020

Analyst : Mukul Kumar