HCG - HealthCare Global Enterprises Limited Share Price

Management's outlook for HealthCare Global Enterprises Limited (HCG) reveals a strong focus on maintaining leadership in cancer care while exploring new growth avenues. The company reported a revenue growth of 20% in Q4 FY '25, with total revenues reaching INR 571.1 crores and INR 2,165.1 crores for the full year, excluding Milann centers. Adjusted EBITDA stood at INR 106.9 crores for Q4, reflecting a 14% increase, and INR 396.3 crores for FY '25, reflecting a 17% rise, with margins at 18.3% and 17.8%, respectively.

The company has made significant investments in early cancer detection and precision medicine, acquiring advanced technology like the Orbitrap Astral Mass Spectrometer to enhance their molecular profiling capabilities. HCG aims to operationalize over 900 beds in the next three years and is opening new hospitals, including a 189-bedded cancer center in Ahmedabad designed for 30%-40% increased patient footfall.

Management highlighted the completion of key acquisitions, including MG Hospital in Vizag, and is expanding their operations in Bangalore with two new facilities. In FY '26, they expect to maintain a high growth trajectory with a capex plan of INR 286 crores. The effective tax rate is projected to be around 30% for FY '26.

Despite facing challenges in the international patient segment due to geopolitical issues, management believes they can mitigate this with domestic growth strategies. They expressed confidence in sustaining financial performance and profitability, with established centers showing margins above 20%, while emerging centers continue to mature. Overall, HCG is optimistic about upcoming expansions and technological advancements, which are anticipated to enhance their market presence and operational efficiencies.

Q&A Section of the Earnings Transcript

Question 1: Margins are much lower than the hospital chains? Is that going to be a steady margin profile for our type of single specialty-based health care? What sort of margin profile do you then expect at a company level for the coming year and maybe the next 3 years?

Answer: Our established centers showcase over 20% margin, while emerging centers are just above 10%. Combined, we deliver close to 18% margin. As these centers grow, evidenced by last year's 32% revenue increase, we expect overall margins to improve, reaching low 20s over the next few years despite some dilution from new centers initially.

Question 2: What are the specific strategies that we are incorporating to translate revenue and EBITDA growth into tangible PAT growth? Will primary issuance help in reducing debt?

Answer: Our recent expansions raised depreciation and interest costs, lowering PAT. However, as we enhance EBITDA from these investments, we anticipate PAT to normalize. If we use primary equity to reduce debt, it will alleviate interest costs, further improving PAT in the future.

Question 3: Could you explain the increase in receivables this year? Is this the new normal for receivable days?

Answer: Receivables were indeed higher due to outstanding collections spilling into April from the election period last year. This shouldn't be considered our new normal; we expect around 105 to 107 days to stabilize going forward, as we've improved our collection process.

Question 4: How has our international patient volume performed this year given geopolitical challenges?

Answer: Geopolitical issues, especially with Bangladesh, have reduced medical visas impacting international patient inflow. While this affected our international business, we've compensated through strong domestic growth, maintaining our overall revenue growth despite these challenges.

Question 5: What growth do you anticipate for ARPOB in FY '26, especially considering the expansion into higher ARPOB clusters?

Answer: We're projecting a 7% to 8% increase in ARPOB as we implement high-end treatment modalities and decrease length of hospital stays. The new facilities in Ahmedabad and Bangalore are expected to contribute significantly towards achieving this growth.

Question 6: Could you provide insight on the Milann business struggles? Are there plans to divest?

Answer: Milann has struggled due to competition, particularly from a former partner. We're now in discussions for a potential divestment with our new investor, aiming to finalise this proposal within the current fiscal year.

These answers encapsulate key points from the management's responses while maintaining the character limit requested.