Narayana Hrudayalaya Ltd. (NSE Code: NH), one of India’s leading healthcare providers, has consistently demonstrated resilience and growth in the highly competitive healthcare sector. The company’s Q3 FY25 earnings call provided valuable insights into its financial performance, operational updates, and future growth strategies. This blog post delves into the key highlights from the earnings call, investor presentation, and annual report, offering a comprehensive analysis of NHL’s current standing and future prospects.
Financial Performance: Steady Growth Amidst Challenges
NHL reported a 13.5% year-on-year (YoY) growth in revenue, reaching ₹1,366.7 crore in Q3 FY25. The net profit also saw a modest increase of 2.6% YoY, standing at ₹193.1 crore. Despite seasonal challenges and festival-related holidays, the company managed to deliver a steady performance across its business units.
Key Financial Metrics
| Metric | Q3 FY25 | YoY Growth |
|---|---|---|
| Revenue | ₹1,366.7 crore | 13.5% |
| Net Profit | ₹193.1 crore | 2.6% |
| EBITDA Margin | 23.8% | – |
| PAT Margin | 14.1% | – |
The EBITDA margin for the quarter stood at 23.8%, reflecting the company’s focus on cost efficiencies and operational improvements. The PAT margin was 14.1%, indicating healthy profitability despite the challenges.
Cost Structure
The cost structure remained stable, with doctors and nurses accounting for 28% of operating expenses, followed by consumables (23%), overheads (19%), and manpower (12%). The company expects these cost structures to remain similar in Q4 FY25, with some variability due to higher anticipated revenues.
Geographical Performance: India Leads the Way
India continues to be the primary growth driver for NHL, contributing significantly to the overall revenue. Here’s a breakdown of the geographical performance:
| Region | Revenue Contribution |
|---|---|
| Bangalore | 34% |
| Kolkata | 26% |
| Northern Region | 15% |
| Eastern Peripheral | 10% |
| Southern Region | 10% |
| Western Peripheral | 5% |
Patient Footfalls
The company reported 59,000 in-patient (IP) and 6,20,000 out-patient (OP) footfalls during the quarter. The average length of stay (ALOS) was 4.3 days, and the occupancy rate was slightly below 60%.
| Metric | Q3 FY25 |
|---|---|
| In-Patient Footfalls | 59,000 |
| Out-Patient Footfalls | 6,20,000 |
| Average Length of Stay | 4.3 days |
| Occupancy Rate | <60% |
Average Revenue per Patient
The average revenue per patient was ₹1,33,500 for IP and ₹4,400 for OP.
New Hospitals and Expansion Plans
NHL’s new hospitals in Gurugram, Dharamshila, and SRCC Hospital (Mumbai) collectively generated ₹130 crore in revenue during the quarter. While SRCC registered marginally negative EBITDA margins, Gurugram and Dharamshila showed positive trends, with Dharamshila achieving high double-digit EBITDA margins.
Expansion Strategy
NHL is adopting a flexible expansion strategy, focusing on brownfield expansions in core markets like Bangalore and Kolkata. The company plans to add 5-10 beds to various units and is also working on remodeling and restructuring efforts in its Health City campus.
Capex Plans
NHL plans to fund its capex requirements through a mix of debt (80%) and internal accruals (20%), maintaining a comfortable debt-to-EBITDA ratio of ~3x.
Cayman Islands: A Growing International Presence
NHL’s international operations in the Cayman Islands also showed promising growth, with operating revenue increasing by 15% YoY to $35 million. The company commissioned a new day-care facility in December 2024, which has started receiving positive responses.
| Metric | Q3 FY25 |
|---|---|
| Revenue | $35 million |
| Average Revenue per Patient (IP) | $34,900 |
| Average Revenue per Patient (OP) | $1,300 |
| Out-Patient Count | 9,910 |
The company is also exploring opportunities in the Caribbean region, with a recent small investment in the Bahamas. NHL aims to maintain healthy EBITDA growth and improve realizations in its international operations.
Specialty-wise Revenue Mix and Future Focus
NHL’s revenue mix across specialties in Q3 FY25 was as follows:
| Specialty | Revenue Contribution |
|---|---|
| Cardiac Sciences | 31% |
| Oncology | 17% |
| Gastro Sciences | 13% |
| Renal Sciences | 9% |
| Neuro Sciences | 8% |
| Orthopaedics | 4% |
| Others | 18% |
The company is focusing on efficiency improvements within its existing facilities rather than pursuing new developments. For instance, in Health City, there is ample land to accommodate ~4,000 beds, but the company is prioritizing operational efficiency over expansion.
Key Takeaways and Investment Perspective
- Steady Growth: NHL continues to deliver steady revenue growth, driven by its strong presence in India and expanding international operations.
- Cost Efficiency: The company’s focus on cost efficiencies and operational improvements is reflected in its healthy EBITDA and PAT margins.
- Expansion Plans: NHL’s flexible expansion strategy, focusing on brownfield projects and core markets, positions it well for future growth.
- International Growth: The Cayman Islands operations are showing promising growth, with new facilities and investments in the Caribbean region.
- Capex and Funding: The company’s capex plans are well-funded, with a balanced mix of debt and internal accruals, ensuring financial stability.
Conclusion
Narayana Hrudayalaya Ltd. has demonstrated resilience and steady growth in Q3 FY25, despite seasonal challenges. With a strong focus on cost efficiencies, strategic expansions, and a growing international presence, NHL is well-positioned to capitalize on the increasing demand for healthcare services in India and abroad. For investors, the company’s consistent performance and clear growth strategy make it a compelling option in the healthcare sector.
Financial Performance Over the Years
NHL has shown consistent growth in revenue, profitability, and cash flow over the past few years. Below is a summary of the company’s financial performance from FY21 to FY24:
| Metric | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|
| Revenue | ₹2,583 crore | ₹3,500 crore | ₹4,500 crore | ₹5,387 crore |
| Net Profit | -₹14.29 crore | ₹100 crore | ₹500 crore | ₹789.62 crore |
| EBITDA Margin | -14.55% | 10% | 20% | 24.5% |
| PAT Margin | -3.81% | 5% | 12% | 15.7% |
Revenue Growth
NHL’s revenue has grown at a compound annual growth rate (CAGR) of approximately 20% over the past three years, driven by increased patient footfall, higher realizations, and expansion into new markets.
Profitability
The company has successfully turned around its profitability, moving from a loss in FY21 to a significant profit in FY24. This reflects improved operational efficiency, cost management, and economies of scale.
Cash Flow
NHL has generated strong cash flows from operations, enabling it to fund its expansion and capital expenditure without relying heavily on external financing. This indicates a healthy financial position and the ability to sustain growth.
Challenges and Risks
While NHL has demonstrated strong financial performance, there are several challenges and risks that the company must navigate:
- Rising Liabilities: The increase in both current and non-current liabilities could pose a risk if not managed properly. The company needs to ensure that its debt levels remain sustainable and that it maintains sufficient liquidity to meet short-term obligations.
- Capital Expenditure: While the company’s investments in infrastructure and expansion are necessary for growth, they also require significant capital. NHL must balance its capital expenditure with profitability and cash flow generation to avoid over-leveraging.
- Operational Efficiency: As the company continues to expand, maintaining operational efficiency and cost control will be critical to sustaining profitability. Any inefficiencies could erode margins and impact overall financial performance.
Conclusion
Narayana Hrudayalaya Ltd. has demonstrated strong financial performance over the past few years, with significant growth in revenue, profitability, and cash flow. The company’s focus on expansion, operational efficiency, and high-demand specialties has positioned it well for future growth. However, managing rising liabilities and ensuring sustainable capital expenditure will be key challenges moving forward. Overall, NHL’s financials reflect a healthy and growing organization with a clear strategy for long-term success.
Technical Analysis: Bullish Momentum with Caution
As of 27th February 2025, NHL’s stock is showing strong bullish momentum, supported by high trading volumes and outperformance against benchmarks. However, technical indicators suggest that the stock may be overbought, indicating a potential short-term pullback or consolidation.
Key Technical Indicators
| Indicator | Value | Insight |
|---|---|---|
| Close Price | ₹1,491.00 | Up 1.7% from previous close |
| 52-Week High | ₹1,514.70 | Trading just -1.6% below |
| 1-Week Performance | ▲6.2% | Outperforming NIFTY 50 and NIFTY PHARMA |
| 5-Year Absolute Return | +333.0% | Strong long-term growth |
| William %R | -11.09 | Overbought zone |
| CCI | 242.13 | Overbought zone |
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Conclusion
- Short-Term: The stock may experience a pullback or consolidation due to overbought conditions, but the overall trend remains bullish.
- Long-Term: The stock’s strong fundamentals, consistent outperformance, and robust price appreciation over the past 5 years make it an attractive investment for long-term investors.
- Caution: Investors should monitor the overbought indicators and wait for potential pullbacks to enter or add to positions.
Final Thoughts
Narayana Hrudayalaya Ltd. is a strong performer in the healthcare sector, with a clear growth strategy and solid financials. While the stock is currently trading at a premium, its strong fundamentals and growth potential make it an attractive option for long-term investors. However, investors should remain cautious of short-term overbought conditions and monitor the company’s ability to manage risks associated with its expansion and new product launches.
Disclaimer: This analysis is based on the Q3 FY25 earnings call, investor presentation, annual report, technical and fundemental analysis of Narayana Hrudayalaya Ltd. and is intended for informational purposes only. It should not be construed as investment advice. Please consult with a financial advisor before making any investment decisions.
