Krishna Institute of Medical Sciences Limited is one of the largest corporate healthcare groups in South India specially in AP and Telangana. It provides multi-disciplinary integrated healthcare services, with a focus on primary secondary, tertiary care and quaternary healthcare. Company operates 9 multi-specialty hospitals under the “KIMS Hospitals” brand, with an aggregate bed capacity of 3,064, including over 2,500 operational beds as of March 31, 2021. Positives: (a) Company having a good track record of retaining high quality doctors, consultants and medical support staff. (b) Company having negative Debt/Equity ratio, which is one of the lowest ratios among the peers. (c) Company having very high ROCE of 24% in FY2021 along with one of the highest EBITDA growth in the last 3 years. Investment concerns: (a) Business highly dependent on our healthcare professionals, including doctors that company engage on a consultancy basis, business and financial results could be impacted if it is unable to retain healthcare professionals. (b) Company dependence on their flagship hospital at Secunderabad in Telangana is at 33% any geopolitical changes can impact the company business. (c) Upcoming expansion plans in Bangalore & Chennai will require a lot of fresh capitals and both are very competitive markets. Outlook & Valuation: Based on FY-2021PE of 31.2x and EV/EBITDA of 17.8x at upper band of the IPO price and are slightly better than the peers’ companies. Similarly, company having one of the best ROE & ROCE of 23.8% and 24.8% respectively. Company having a very healthy balance sheet with negative Net Debt/ Equity. We expect the upcoming expansion plan in Bangalore & Chennai can be funded through internal accruals and minimum amount of debt. We are assigning a “SUBSCRIBE” recommendation to the issue.
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