Post the recent listing and a weak performance since then, Shalby Hospitals reported a tepid set of Q3FY18 numbers. While the revenue at Rs 97.3 crore was up 30 percent YoY (year on year) and EBITDA (earnings before interest depreciation and tax) grew 10 percent YoY, EBITDA margins at 21.7 percent were down 15 percent YoY. Profit after tax during the period was down almost 52 percent YoY and 26 percent QoQ.

Despite a jump in revenues, operating profitability during the quarter was impacted by a sharp increase in operating and employee expenses by almost 39 percent. According to the management, this was majorly due to additional expenditure from expansion and new hospitals and bed additions during the quarter. Margins are expected to look up with improvement in occupancies at new units in the coming quarters. Moreover, given that Q3 is a seasonally weak quarter owing to Diwali, the management expects performance to stabilise in Q4.

Utilization of IPO proceeds

Utilization of IPO proceeds towards repayments enabled the company to reduce the mounting debt on the balance sheet and there was a slight fall in the finance cost during the quarter. Given that the repayments were made in the month of December, the interest cost is expected to reduce further starting Q4FY18. The repayment would also improve the debt equity profile for the company.

The company is currently trading at a PE of 43x trailing earnings with an operating margin profile of around 21 percent which seems attractive compared to peers. However, owing to high debt, the EV/EBITDA of the hospital chain is substantially higher than peer average at 37x.

Overall, the current earning trajectory and near term visibility promise little upside. Given the planned capex and substantially low financial numbers till date, we expect full year performance to reflect timid or little growth. – Money Control 


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