Stepping up digital innovation to stay ahead of competition

The new normal!

We interacted with the Senior Management of Narayana Hrudayalaya represented by Mr. Viren Shetty, COO along with Mr. Debangshu Sarkar, Head of IR and his colleague, Mr. Ashish Sukhija to get more insights on Narayana’s business. Narayana sounded very optimistic on the near term growth prospects. India revenue has recovered to pre-Covid levels and the situation can only improve from here onwards unless of course there is a severe impact of a possible third wave. Cayman should also continue its growth trajectory although some softness can happen during Q3FY22 as insurance benefits are generally extinguished during Q3, Q4FY22 should be devoid of this and thus better than Q3FY22. From a long term perspective, the Management is confident about the growth in India and Cayman given the demographic situation in India as well as in Cayman, where a recent trend of locals getting treated at Narayana’s facilities rather than in the US has been observed. The proposed investment in Cayman’s new facility at Camana Bay should further bolster the confidence of locals getting treated in this facility as the facility would be equipped with state of the art equipment with a focus on oncology, while all other speciality departments would also be present. Besides, inflow of patients from the US should also increase going forward with the commissioning of the new facility. Refurbishment of hospitals in India Narayana has elaborate plans of refurbishing its hospitals in India with a reduction in number of beds in general wards, the freed up capacity being used for ICU, Critical Care and Day Care beds. More number of private and semi private beds would also be added. Narayana feels that the situation is not as dire as it was 15 years earlier with respect to affordable healthcare as during that time Narayana was probably the only player in the private space catering to low income patients. Many new hospitals have come up across the country since then, which provide affordable healthcare. Besides, the paying capacity of patients has also improved over the years with further inroads being made in terms of insurance penetration. Thus, the refurbishment of the hospital network in India would take care of the changing dynamics effectively without hampering the basic ethos of Narayana as an affordable healthcare provider. The total cost of refurbishment would be around Rs 10,000 mln over 5 years. Preparation for a possible third wave Narayana is adequately prepared to face a possible third wave. All the beds across all facilities would be ICU convertible if necessary with high flow oxygen and ventilators. Narayana expects the third wave to be much milder compared to the second wave, however, if children get affected out of proportion then the available beds in the country across all hospitals will not be able to cope up as it totals to just 2000. Case mix and payor mix Narayana is continually focusing on improving the case mix across its hospitals, particularly in the ones located in Tier 1 cities. For example, it brings on board highly specialised surgeons who have trained in the US and UK to treat complicated diseases. While the number of complicated cases may not be high in number in a Tier 1 facility, the realisations are far superior leading to higher margins. Having said that, the cost of treatment of a highly complicated case would still be lower than other multispeciality hospitals. In terms of payor mix, Narayana expects the proportion of cash patients to fall to 40% from the current level of 50% in the long run. The decrease would be balanced by an equivalent increase in insurance patients while scheme patients would continue to be 20%. Over supply situation in Cayman Cayman’s current population is around 60,000 plus there are around 10-15,000 migrant workers. Even before Narayana entered Cayman there was an oversupply situation as the number of beds available per 1000 patients was above the WHO recommended guidelin

HDFC Life announces 100% acquisition in Exide Life

Outperformance continued in Covid affected year The company reported 5% YoY revenue growth in FY21 vs. industry’s volume degrowth of 14% for the same period. All its core segments viz. Auto cables, non-auto cables and Phoenix Lamps division reported YoY growth. Suprajit managed the challenges in FY21 very well and continued its outperformance despite multiple challenges viz. Covid related disruptions, IC part shortages, shipment delays, port congestions, commodity price increases and other Covid related issues across various plants across the industry. Post lifting of 1st lockdown, aftermarket sales were robust, followed by a gradual recovery in the subsequent quarters and Q4FY21 was one of the historic quarters for the company with record sales. Moreover, it reduced debt by ~14% YoY to Rs 3.27bn as of 31st March 2021 and declared interim as well as final dividend too in a Covid affected year. Buy back was a huge success for the company and it plans to do buyback once in a few years, as the management has reviewed the policy towards higher distribution to shareholders. EV opportunities and adding new products to diversify business further The management doesn’t see any major risk due to electric vehicles and in fact new & more opportunities for cables could emerge in EV. Some minor changes might happen in e2Ws; however, to offset this, the company is working on new opportunities like throttle positioning system, etc. Although, halogen sales to OEMs could impact due to electrification, however aftermarket is a huge opportunity. Its R&D centre has developed a few products viz. digital speedometer, CBS, brake shoes, etc. for the future requirements and some of these are in advanced stage of commercialization. Outlook for FY22 The challenges faced in FY21 continue in this year as well, however, with speeding up of the vaccinations, rest of the year will be satisfactory with continuation of outperformance at consolidated level. The semi-conductor shortage will impact production of domestic and global OEMs and in turn Suprajit’s performance, however the advantage of the company is its diversification across segments/geographies and have orders in hand. PV and exports continue to remain strong, while 2Ws in domestic have some amount of softness. The management is confident of limiting the Covid impact in FY22 and deliver strong performance ahead. Also, maintained guidance of 14-16% margin band, which is at a respectable level in the auto component industry. Cost cutting and efficiency improvement is a continuous process. The company is actively looking for inorganic opportunities and the addition of new products to further strengthen Suprajit in the years ahead. Capex will be 2-3% of revenue. Valuations - well diversified and consistent performer Suprajit should get a scarcity premium for its dominant leadership position and its year-on-year outperformance is noticeable. Assigned multiple of 21x FY23e EPS of Rs 17.9 to arrive at a TP of Rs 376 per share. Recommend BUY.

Building on strengths, growth prospects buoyant

CSM segment going from strength to strength!

Established in 1981, Vijaya Diagnostic Centre Limited (“VDC”) is the largest integrated diagnostic chain in Southern India by revenue, and also one of the fastest-growing diagnostic chain by revenue for FY20 (Source: CRISIL Report)

Established in 1981 by Dr S Surendranath Reddy, Vijaya Diagnostic is the largest integrated diagnostic chain

Incorporated in 2004, Ami Organics is a research and development