Narayana Hrudayalaya Ltd and Max ventures : Result Update

Narayana Hrudayalaya Ltd-Narayana has given great set of numbers…even surpassing all the expectations:

Fig in Cr.
Description	Sep-19	Sep-18	Growth %
Turnover	822	713	13.26%
EBITDA	128	76	68.42%
EBITDA margin	15.57%	10.66%
NP	45	13.5	233.33%

As we can see, against top line growth of 13% the growth in NP is staggering 2.3 times so operating leverage is getting into action now and this will only increase from here on. NH still has 11% of its total bed capacity as new centers and these have negative EBITDA of around 14 cr this quarter and as the same will get matured the performance will be even better. EBITDA margins are at 15.6% vs 10.6% last year. For its Cayman island hospital HCCI- the revenue growth is 26% from USD 12.7 million to USD 16 million (around Rs. 114 cr). At 24% its EBITDA margins are great and this shows the potential when NH will decide to expand HCCI capacity and will open more such centers worldwide near developed countries. But that will happen once NH is free from India and if you ask me that may take some more time as India in itself is yet an under-developed market and scope of expansion is vast. NH has invested big in last 3-4 years and I think it’ll take a little breather now and then the next round of investments will come. But in my view for global expansion they need a partner and it is not the best model where NH is putting all the money as this will run into big money so very soon we’ll see something big in this line also from NH…may be some foreign governments will chose NH as their partner for their country wide healthcare programme.

I still find it hard to believe why our government is slow in recognizing these new pillars of Indian economy. Why our economists still think that our consumption is slowing down and we need to consume more for the growth? If you ask me then this should be the problem of some developed country like America not a growing country like India. We need investments into other segments now. Autos and FMCG are at saturation point as per our current status of income and employment levels so we need to increase our income and employment penetration into real economy. Healthcare is our expertise and we urgently need to build a business model around it to capture export business whether in the form of medical tourism or investments in other countries like Africa. African nations regard India as blessings due to extremely cheap medicines for deadly diseases like AIDS produced by Indian pharma companies like Cipla and Laurus labs (laurus Labs is another name which will become big in the near future. I have invested big chunk of my portfolio in It. This is my second pharma investment after Biocon).

Recently Narayana Health has been recognized as one of the world’s most innovative health care providers by Fortune magazine’s annual “Change The World” list of companies. It is at 33th place out of 52 and it is the only one out of 9 firms with less than a billion dollars in annual revenue. It even toppled the global giants like Alibaba, Hilton, eBay, JPMorgan Chase, and Patagonia. Here, the scale of charity is not the factor to look after but along with the desire to do something good for the humanity/society the firm should have a great sustainable business Idea and that is what set NH apart from the crowd.

I am going to do some more buying of NH in order to celebrate the success of NH. I do not think that we may be able to see this one under 300 may be after tomorrow.

Max Venture: The results are just great. But the most hearting thing is the announcement that they have bought a distressed real estate asset in Noida. I was expecting this and mention the same in my previous post also. I had marked this step as a sign of their strategy that they are going to make the maximum of current state of affairs of real estate sector.

They have entered into an agreement to buy a land parcel at a prime location on Noida Expressway (Sector129) for Rs. 110 cr and development potential of this land is approx. 7 lakh sq ft. Just like the Max Tower they will make a Grade A + leasable Commercial Office space. They have built the max tower on “Workwell” philosophy where employee can also enjoy recreational activities along with office work. Better organizations these days are recognizing the need to offer their employees a stress free and engaging work environment in order to make them perform at their full potential and staying healthy. So recognizing the need of these companies, Max has built this tower and this shows their vision in judging the best opportunity. They have the skills to develop real estate because in Max Healthcare they have developed some of the best hospitals in India and this experience of developing top quality real estate will prove to be a big difference in strong execution skills and they have proved the same by completing the max tower in record time with one of the best in design and quality.

For results, their topline is at 435 vs 268 cr last year and PBT (excluding other income) is at 13.23 cr vs loss of 12 cr last year. With very high growth potential, Net worth at 870 cr, right issue at a valuation of some 950 cr …it is trading at a valuation of 576 cr. Good worthy bet in commercial real estate.

(Views are personal and should not be taken as a recommendation for buying or selling a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing. I am not a certified Sebi Analyst and holding the shares discussed in this Post. Reach me at oscillationss@yahoo.in).