Revenue declined 6.0 per cent YoY to Rs 11.1bn with hospitals declining 0.6 per cent, diagnostics dropping 8.0 per cent
Fortis Healthcare (FHL) reported weak Q4FY20 performance as it was impacted by lockdown in March 20. The performance is expected to remain muted in near term, however, business is recovering on monthly basis from the low in April and normalisation is likely to happen in H2FY21. Revenue declined 6.0 per cent YoY to Rs 11.1bn with hospitals declining 0.6 per cent and SRL (diagnostics) dropping 8.0 per cent. Focus on cost control helped in cushioning the impact on margin. EBITDA margin improved 160bps YoY but declined 210bps QoQ. Company has shown material operational improvement in terms of occupancy and ARPOB at hospitals with EBITDA margin expansion in hospitals and diagnostics led by cost rationalisation and operating leverage. Management has taken various steps on personnel cost front to reduce cost burden further.
Revenue decline stood at 6.0 per cent YoY, due to 8.0 per cent drop in SRL revenue and flattish hospital revenue. The decline is primarily attributed to the lockdown which affected the hospitals and diagnostics businesses negatively. Occupancy was down to 65 per cent in Q4FY20 vs 68 per cent YoY and QoQ. Management has guided for significant business decline in Q1 and gradual recovery from Q2FY21. Fortis has allocated ~1,000 bed for COVID-19 treatment. The occupancy fell to 29 per cent in Apr which improved to 35 per cent in May and further increased to ~45 per cent in June till date.
EBITDA margin improved 160bps YoY to 11.3 per cent with the absence of BT cost and cost control initiatives. However, EBITDA margin was ~300bps below estimate due to lower revenue. Management continues to focus on cost control initiatives and has taken various steps to reduce fixed hospital personnel cost. Lot of steps have been taken in diagnostic business as well to reduce operating costs without impacting the business momentum.
Management has been focussing on stabilising operations and cost rationalisation. Business is expected to normalise in H2FY21 and estimate revenue, EBITDA and PAT CAGRs at 6.9 per cent, 16.0 per cent and 80.9 per cent respectively over FY20-FY22E.
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