Buy Kovai Medical; target of Rs 225: Sunidhi Securities

Sunidhi Securities is bullish on Kovai Medical Center and has recommended buy rating on the stock with a target of Rs 225 in its November 29, 2012 research report.

“Incorporated in 1985, Kovai Medical Center and Hospital (KMCH), the 867-bed Multidisciplinary advanced super specialty hospital located in a clean, serene 20 acre plot in Coimbatore offers total and comprehensive health solution for various diseases. Comprehensive infrastructure, cutting edge technology, latest Hi – Tech medical equipments in all specializations and committed medical experts make KMCH trusted brand. The hospital has pioneered several techniques like the steroid free kidney transplantation, GDC coiling and clipping for brain aneurysms which save lives, improve patient comfort and minimize side effects. There are three satellite centers attached to KMCH-City Center (Ram Nagar), Erode Speciality Hospital (100 bed). Erode Center (100 bed) with both in-patient and outpatient facilities. It has a rural health center at Veeriampalayam to serve the rural community and the under privileged.”

“During Q2FY13, net profit climbed 51% to Rs5.8 crore on 40% higher revenue of Rs75 crore. OPM and NPM stood at 25.4% and 8.0% Vs 22.3% and 7.2% respectively in Q2FY12. EPS for Q2FY13 stood at Rs5.3 Vs Rs3.5 in Q2FY12. During H1FY13, net profit rose 50% to Rs9.4 crore on 37% higher sales of Rs143 crore. OPM and NPM stood at 24.6% and 6.5% Vs 20.9% and 6.0% respectively in H1FY12. EPS for H1FY13 stands at hefty Rs8.6 as against Rs5.3 in H1FY12. During FY12, net profit fell 1.2% to Rs12 crore on 27% higher revenue of Rs222 crore. EPS stood at Rs11.0. A dividend of 12.5% was paid.”

“KMCH is now expanding its service to all other medical segments to shore up the revenue. In recent times KMCH is very aggressive in bringing new technologies, most modern facilities and new departments to its fold. KMCH has plans to open new satellite centers in other places, which would enhance revenue further going forward. At the CMP of Rs160, the share is trading at a P/E of 8.9x on FY13E and 7.3x on FY14E. The average P/E for the healthcare industry currently hovers at staggering 42.0. This provides ample opportunity for KMCH shares to rise smartly on strong fundamentals. We recommend BUY with a target of Rs225 in the medium term,” says Sunidhi Securities research report.

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