and Krishna Institute of Medical Sciences (), both freshly listed on the bourses, debuted within a month of each other. Both were heavily affected by the first wave of the lockdown, in the June quarter. Both have taken advantage of the pandemic to grow their business. The similarities end here, perhaps.
A glance at the June quarter number shows KIMS has left Zomato miles behind. On a YoY basis, the hospital chain reported a 10-fold jump in profit, over a 4-fold jump in PAT margin and nearly four times growth in ebitda. In comparison, Zomato’s losses nearly quadrupled despite a three-time jump in revenue. Even sequentially, the growth in KIMS’ numbers look much better than Zomato’s.
Comparing the stock market performance, as of Tuesday’s closing price, Zomato was up 80 per cent, while KIMS has advanced 48 per cent over their respective issue prices.
This is definitely not a recommendation that you should buy stock over the other. Both stocks have their own merits. It is just to show that in the ongoing IPO boom, two completely different types of businesses are landing on Dalal Street, and both have generated strong investor attention, albeit by different sets of investors.
Zomato will most probably attract risk-taking investors, while traditional value investors will never take a bite of it, as they have expressed in no uncertain terms. KIMS, on the other hand, will be a mouthwatering snack for this crowd. For instance, investors like Safir Anand have said that it was one of the better picks among the recent IPOs.
For the uninitiated, KIMS operates a multi-speciality hospital chain with an aggregate bed capacity of over 3,000, mostly in Andhra Pradesh. It plans to add about 1,500 beds in 3-4 years. It is focused on providing affordable health services across tier-II and tier-III cities.
Apart from the spectacular earnings growth that has attracted a lot of buyers in the last couple of days, the expansion plans and high return ratios have made analysts gung-ho on the stock. In the next 12 months, they see the counter almost doubling from the IPO issue price of Rs 825.
The company has priced its procedures average 20-30 per cent lower than other private hospitals in India. This has led to high revenue growth, analysts noted. Despite lower charges, its ebitda margins are among the highest in the industry.
“High RoIC (return of invested capital) of 32 per cent led the company to generate a strong cash flow of Rs 300 crore every year, enabling it to achieve net debt-free status. KIMS has achieved the highest ebit margins in the industry by controlling doctors’ costs (doctor participation model) and no rental expenses,” said Ankush Mahajan, Research Analyst at Axis Securities.
In the just concluded quarter, record ebitda margin of 30.4 per cent came in mainly on account of high occupancy, higher revenue per bed and a significant uptake in Covid-19 treatment. Covid business contributed 25 per cent of KIMS’ total revenue and led to outperformance versus the analyst estimates.
“KIMS will continue to benefit from its regional market leadership, strong cash flow generation and sustained focus on operational efficiency and capacity expansion. We believe KIMS is an attractive play in the booming healthcare services market,” said Praveen Sahay, Research Analyst at Edelweiss Wealth Research.
Both analysts said investors should buy the stock at current levels. They regard it as a long-term pick given the growth potential, especially as it has a disciplined expansion strategy.
