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Stock recommendation: HealthCare Global — Reduce — Target price Rs 290
Publish date: August 13, 2018
Results update: Weakness in fertility business drives miss
HealthCare Global (HCG) was off the mark in the earnings department owing to a lackluster fertility business. The cancer care providers also saw its net debt levels increase as it continues to expand the fertility business through its Milann brand.
Key highlights
- HCG’s EBITDA and revenue growth were impacted by a 5% revenue slump in its Milann business (fertility business). While the EBITDA of Rs 306 million missed our estimate by 7%, the revenue growth was 2% below our estimate.
- The Milann suffered a setback due to non-availability of a key doctor in their Bengaluru centre.
- Its oncology business did well by growing at 21% (YoY), while mature centers grew 12% (YoY).
- Even as net debt has increased to Rs 5 billion in quarter ended June, HCG has sounded out plans to expand its presence in Jaipur (50 beds), Kolkata (50 beds) and Mumbai (32 beds).
Valuation & outlook
We reckon the fertility and oncology businesses have built a good base for the future, but the aggressive expansion plans has given HCG very little wriggle room due to high debt levels.
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