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Analyst Research Report Snapshot


Fortis Healthcare (FORH) - Qtr. Update - Dated - May 31, 2013




Axis Capital Limited


31 May 2013





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Fortis Healthcare (FHL) is deleveraging its balance sheet. We expect debt: equity to come down to 0.6x in FY14 (vs. 1.1x in FY13): (a) Sale of Dental Corp (DC), Australia for AUD $ 270 mn; proceeds received in Q1FY14 (expected in FY13 earlier) and (b) Rs 3.2 bn raised via the recent IPP. Deleveraging (resulting in lower interest cost) coupled with higher number of maturing beds and better margin at SRL Diagnostics to drive turnaround in FY15E. Post DC sell-off, India (hospitals and diagnostics) would contribute 70% of total revenue (50% currently). Management guidance of 2,000 bed additions over next 3 years would be driven by RHT (asset light with capex of Rs 2.5 bn p.a) and ~10% ARPOB growth. Estimates and valuation:  We estimate marginal loss in FY14 (PAT of Rs 350 mn expected earlier) to factor in higher interest outgo due to delay in DC sale proceeds. We lower our FY15E EPS to Rs 2.4 (Rs 3 earlier) due to faster roll-out of beds leading to higher set-up cost and service fee  We reduce our DCF-based target price to Rs 119 (Rs 125 earlier). Maintain BUY given 34% upside from CMP of Rs 89 Regards, Kashyap Pujara (ED – Midcaps) Institutional Equity Research Axis Capital Ltd Tel: +91 22 4325 1146 Farzan Madon (VP – Midcaps) Institutional Equity Research Axis Capital Ltd Tel: +91 22 4325 1131

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