Max India Q3FY17 Concall Summary

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Financial Highlights

  • Revenue for the quarter is at 639 crores, growth rate is 16% y-o-y
  • EBITDA margin has improved by 26 basis points & it is at 10.5% this quarter
  • The company has taken out Rs 40 crore in cost in the first 9 months as against the target of 30 crores & expect another 15 crore of cost take out in the last quarter   
  • Treasury corpus of around 320 crores
  • Antara senior living is project & is still in premature stage & the company is in commissioning stage. There is also little bit of accounting issue there as there is lease model to collect the revenues over 60 year period etc. It needs another 9 to 12 months to shape up the business 

Max healthcare

MHC Q3FY17 Financial Performance
  • Robust 9M revenue growth of 23% to achieve Rs 1939 Cr. EBITDA growth at 34% to 203 crores
  • Significant proportion of revenue growth is driven by MHC Star Specialties with renal sciences leading the revenue growth at about 36%.
  • Margins improved by 103 basis points to 11%
  • The improvement in profitability is driven primarily by improvement in margins of new hospitals expanding to 7.5% vs 3.4% in the corresponding period
  • Strong growth expected from Vaishali hospital & Saket city hospital. Want to double bed capacity to 5000 from currently 2500
  • Max Healthcare is expected to continue to outpace growth of most of the other corporate hospital chains in the country
  • Price growth is not easy for the company as it needs regulatory nod, the price increase is on an average 8-10% & once in 2.5 years
  • EBITDA margin for mature hospital & new Hospital is around 11.5% & 8%. 
  • Business of Max labs currently housed in Max healthcare & later on it will be transferred to 100% separate company
  • Manpower has been deployed in 65% of the branches & the IT systems have been integrated with the banks' core system
  • The new pathology B2B business launched in May 2016 has already done over 250 plus tie-ups. It will be launched in Q4FY17, & company intends to scale up the business quite fast
  • The stent pricing control will have minimal impact on the company as cardiac business is not significant one, the impact may be around 10-20 crores

Max Bupa

Max Bupa Q3FY17 Performance
  • Health insurance business performance in its chosen B2C segment continues to remain strong with B2C growth premiums about 24%.
  • Good Customer experience and renewal growth of 30% has also resulted in the conservation ratio improving to 85%
  • Focus on cost led to reduction in loss to 2 crore corresponding to 12 crore loss last year
  • Max bupa GWP premium growing at 23% to 401 crores.
  • Losses were reduced to Rs 18 crore from 52 crores of previous year
  • Tie up with Bank of Baroda is gaining traction as branch ramp up is improving. This alliance will provide Max Bupa access to 5400 branches & almost 60 million customers & is beneficial in long run
  • Among private players the company has about 4.25% of market share
  • Company has tie up with 6 banks including one regional bank i.e Standard Chartered, Deutsche, RBL, Federal Bank, Bank of Baroda and Sarva UP Gramin Bank
  • Claim ratio has come down from 59% to 54% in the quarter
  • Agencies are company’s largest distributor channel & few NBFC. These contribute to 7-8% of the business
  • Max Bupa is growing around 25% and is on course for an operating breakeven in FY19. 

Capex and Expansion Plans

  • Capex In 9 months is around 50 crores which is mainly on replacement of equipments & small additions to the beds etc.
  • The company spent roughly around 45 crore on the Shalimar projects which is undergoing at this point. For vaishali another 150 beds are to be added, so that adds up to around 100 crores in 9 months
  • Capex for Q3FY17 is 35 crores
  • Capex next 4 to 5 years one can be assumed at 2.5% of the revenues & on the beds it can be average 75 lakhs per bed & then spread it over 2 years
  • Launched new oncology day care in Delhi in June 2016 & this year with a team of 200 people have joined already.
  • Earlier for Saket City, the beds allotted were 300 & then 600 in next phase. But now the company has accelerated the Saket city beds to 650 & therefore the balance 300 of the 1200 available capacity gets pushed out by about 2/3rd after the 650 comes in. 
  • For FY17 earlier it was planned for 85 beds because the of the liver transplant program which was introduced which required much space relative to the normal,therefore, there was scaling down of beds in Saket city
  • In FY19 the company has to buy the rest of stake in Saket city
  • Earlier CAPEX expectation was around 2000 crore & in that 1200 crore will be on new bed addition & around 800 crores was on buyback of the stake. But there is slight change because now the CAPEX will only be around 1800

Update on Demergr

  • Max financial services after demerger of the life insurance business will merge with Max India
  • Application for the same have been filed at various regulatory authorities like SEBI, IRDA, CCI

Demonetization Impact

  • Impact of 7-8% due to demonetization
  • On Q4 the effect will be smaller as compared to Q3. 
  • The hospital business continues to be slow in January