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Business News/ Markets / Healthcare Global: Digital transformation helps bring higher revenue from overseas patients
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Healthcare Global: Digital transformation helps bring higher revenue from overseas patients

Healthcare Global Enterprises Ltd (HCG) is one of India’s leading oncology treatment specialists with presence across the country.

HCG – Healthcare Global Enterprise Hospital  (apollocbcc.com)Premium
HCG – Healthcare Global Enterprise Hospital  (apollocbcc.com)

After the Covid-induced disruption, healthcare has now reached a steady state. Lifestyle diseases continue to go up. Occupancies are increasing. Procedures being done now are increasingly complex. Cardiac, GI, neurosciences are all working at high capacities. There is a higher realization now about which hospitals have better expertise and generally people have become more aware of health.

Early detection and more preventive medicine are taking place. Even in the rural areas, people have become more health conscious. This was going to happen anyway, but pandemic has accelerated this. Video consulting was on for a few years, but now volumes have grown 4-5X. Thus, there is a lot of change at the fundamental level driving healthcare. Demand is not an issue at all, as hospitals have not even met 1/3rd of public healthcare demand.

The experts expect ARPOB to sustain, led by price hikes, improved case mix and lower ALOS. Price hikes will not affect volume growth much, as many hospitals are not overcharging. Packages can be made more systematic though.

India has major advantages compared to other countries, and skillset of doctors is also strong. International patients must clearly know the array of services, quality of care and the cost of treatment in India. When people come to India and apply for visa, there are often lots of delays.

Company Overview

Healthcare Global Enterprises Ltd (HCG) is one of India’s leading oncology treatment specialists with presence across the country.

  1. Emerging centre ARPOBs will see improvement in the coming quarters, with increasing contributions from the new hospitals in Kolkata and Mumbai.
  2. Cost optimisation initiatives being advised by the partnered consulting firm should yield margin improvement of 100-150bps in FY24.
  3. Currency fluctuations should not affect raw material prices and gross margins for the company. Company has also further announced two centres. One is an extension centre in Whitefield for their centre of excellence which is a greenfield project. Their Ahmedabad centre of excellence has peaked out in terms of utilization.

Company is relocating in a newer site with an expanded capacity. That's another greenfield project they are doing. Rest beyond that they plan to focus on inorganic acquisition route and as and when opportunity comes for brownfield, they are ready to cater the same.

HCG currently has EBITDA Margins around 17% and it’s expected to expand to 19.7% over FY22-FY24E.

Capital Expenditure (Mn)

The company plans a few inorganic acquisitions as a part of their growth strategy and is actively pursuing them currently. Company is also scouting for few inorganic acquisitions as a part of their growth strategy and are actively pursuing.

Smart acquisitions and driving sustained growth post integration - only realistic buyer for standalone cancer hospitals in India successful track record of acquiring and scaling hospitals Clinical Trials & Diagnostics.

Very low existing scale with 3-4 years of experience finalizing business plans for significant expansion. Capital adjacent opportunity high potential to expand EBITDA without significant capex.

Brownfield / Greenfield Expansion - 6 LINACs in pipeline (own + pay per use) over next 1-2 years to augment capacity in high growth regions. Ongoing greenfield expansion at Ahmedabad and Bangalore by adding 125 beds cumulatively

High revenue growth with well -diversified segments

High Revenue Growth with Well -diversified Segments
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High Revenue Growth with Well -diversified Segments

Milan Fertility Centre demonstrated good recovery across all metrics, with 43% YoY growth in revenue to Rs.17.3cr. New registrations grew 138.5%, due to improved digital traction because of continued effort on digital campaigns. Additionally, Milann plans on implementing continuous focus on strengthening clinical talent. The company intends to consolidate and focus on market leadership in Bangalore and scaling-up North India centres in the near term.

HCG focuses on:

  1. Cost rationalisation
  2. Talent upgrade
  3. Digital transformation

It intends to stick to its core competency area of oncology and has no plans to venture into other therapy areas.

International patients

Alongside Bangalore hospital, Mumbai and Kolkata too are witnessing good inflow of patients. Proximity to Bangladesh (which contributes highest volumes in terms of medical tourism) should bode well for the Kolkata hospital.

On absolute terms, revenues from international patients have increased to 1.5x pre-covid levels. HCG launched a new website in Jan’22 and has tripled the traffic hits since its launch. Moreover, it has also implemented an improved CRM system for better servicing of patients.

Inorganic activity

HCG is selectively assessing assets for acquisition to further strengthen its foothold in the oncology hospital space. It is looking at standalone oncology hospitals that would be EBITDA-accretive from the onset and be available at reasonable valuations.

Tier-2 city hospitals bear a significant discount in terms of ARPOB. While ARPOB in the tier-1 city hospitals typically stands at ~Rs60,000, it would be ~Rs30,000 in the tier-2 city hospitals.

85% of the treatments for cancer can be completed in HCG’s tier-2 city hospitals. Company expects its new hospitals to achieve operational and financial performance like the existing hospitals over ~18-24 months, during which their RoCE would gradually rise to double digits.

Q2FY23 key growth parameters

  1. Emerging centre ARPOBs will see improvement in the coming quarters, with increasing contributions from the new hospitals in Kolkata and Mumbai.
  2. Cost optimisation initiatives being advised by the partnered consulting firm should yield margin improvement of 100-150bps in FY24.
  3. Currency fluctuations should not affect raw material prices and gross margins for the company.
     

 

Shuchi Nahar is a Certified Research Analyst. She can be found on Twitter at @shuchi_nahar

Note: This article is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related investment-related decision.
 

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Published: 18 Nov 2022, 08:29 AM IST
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