ASTERDM - Aster DM Healthcare Limited Share Price

In the earnings call for Q1 FY26, management provided a positive outlook, highlighting a recovery from previous performance dips with significant growth in revenue and profitability. Key figures noted include an 8% year-on-year increase in revenue, resulting in INR 1,078 crores, and a 21% growth in operating EBITDA to INR 215 crores, leading to an operating margin expansion to 20% from 17.7% over the previous year. Profit After Tax (PAT) also rose 22% year-on-year, reaching INR 90 crores.

The management emphasized their confidence in sustained growth, supported by a strategic focus on enhancing specialty services such as oncology and neurosciences, which now represent 11% of revenue. Furthermore, they noted improvements in Average Revenue Per Occupied Bed (ARPOB), which increased by 14% to cross INR 50,000 for the first time, alongside a 4% reduction in Average Length of Stay (ALOS), contributing to better capacity utilization and care efficiency.

Management outlined plans for significant bed expansions, targeting over 7,800 total beds in the coming years, supported by a new 500-bed facility in Yeswanthpur, Bangalore. The merger with Quality Care India Limited (QCIL) was described as transformative, expected to create a comprehensive integrated healthcare network. The combined entity projected proforma revenues of INR 2,157 crores with an operating EBITDA of INR 442 crores, showcasing a potential growth trajectory for future operations.

A focus on digital initiatives was also noted, including the Aster Health app which has over 100,000 downloads, indicating a strong push towards enhancing patient engagement and operational efficiency through technology. Overall, management expressed optimism about operational synergies, growth prospects, and industry positioning in the evolving healthcare landscape of India.

1. Question: "Can you provide some quality of color on the business such as what are the changes we have seen on medical tourism on a QoQ basis and what's the directional trend for Q2?"
Answer: "Overall, Kerala's revenue grew by 5% year-on-year with a 6% increase in sequential patient volumes. We are focusing on the Oman and Maldives segments, seeing notably better performance following leadership stability. For Q2, we expect this momentum to continue due to enhanced operational strategies and a revised go-to-market approach."

2. Question: "Do we expect this healthy EBITDA margin trend to continue in the Kerala business?"
Answer: "Yes, we anticipate the operational efficiencies we have implemented, including manpower optimization and cost-control measures, will help maintain the healthy EBITDA margin trend in Q2 and beyond. Our focus on improving operational efficiency will be crucial."

3. Question: "How should we view the recent exit of a long-term CEO? Is this part of the restructuring before the merger?"
Answer: "The exit is part of our holistic approach to redefine our organizational structure due to the upcoming merger. We're evaluating how best to align leadership roles across clusters and hire key resources to strengthen our combined organization as we prepare for this transition."

4. Question: "Can you explain the lower volumes in Karnataka and if other factors beyond the discontinuation of contracts influenced this?"
Answer: "The 5% decline in volumes in Karnataka resulted primarily from our strategic exit from lower-margin schemes at Aster Aadhaar, affecting around 20% of our bed occupancy. While this led to short-term volume reduction, we observed ARPOB growth as a positive outcome of that strategic change."

5. Question: "What's the strategic focus for the new Bangalore hospital in Yeswanthpur, given the competition?"
Answer: "Yeswanthpur is strategically located to tap into an affluent demographic with minimal large-scale hospital coverage. We plan to establish a multi-specialty facility focusing on areas such as oncology and neurosciences, capitalizing on a demand gap in the region."

6. Question: "What's the expected timeline and capacity for the new hospital projects in Kasargod and Ongole?"
Answer: "The Kasargod facility will commence operations within 2-3 months. The Ongole expansion is still being finalized, but we aim to keep the timeline on track and will provide updates in the coming quarters."

7. Question: "What is the expected CAPEX for Aster and QCIL over the next 2-3 years?"
Answer: "Aster is looking at a CAPEX of approximately INR 2,500 crores for adding around 2,600 beds. For QCIL, the estimated project CAPEX is about INR 1,100 crores over the same timeframe, along with an ongoing yearly capex of 5% of its topline."

8. Question: "With regard to the diagnostics business, how does Aster plan to position itself post-merger?"
Answer: "We're focusing on the diagnostics sector as an integral part of our ecosystem to enhance patient experience. While we're not aiming for a pan-India expansion, we will stabilize and potentially scale in key markets, maximizing synergies from the merger."

9. Question: "Can you elaborate on the EBITDA margins in the Andhra and Telangana cluster despite increased ALOS optimization?"
Answer: "The minor dip here is attributed to an increase in material costs and some clinical attrition during this transition phase. We're onboarding new talent, and as we stabilize, we project a return to our historic EBITDA margin levels of around 12-13%."

10. Question: "When do you expect to see a balance between ARPOB growth and volume contributions?"
Answer: "We're currently re-establishing volume growth that had been subdued. We anticipate regaining momentum in volumes, likely seeing a balanced contribution from both ARPOB and volumes as operational efficiencies improve, projecting a return to double-digit growth in the near future."