Analyst Research Report Snapshot

Title:

Fortis Healthcare (FORH) - Qtr. Update - Dated - August 13, 2013

Price:

$35.00

Provider:

Axis Capital Limited

Date:

14 Aug 2013

Pages:

4

Type:

AcrobatPDF

Companies referenced:

FOHE.NS

Available for Immediate Download
Summary:

Fortis Healthcare (FHL) Q1FY14 results were disappointing as it reported loss of Rs 2.2 bn, led by (1) exceptional loss of Rs 850 mn due to forex, (2) higher than expected interest outgo, and (3) lower operating margins due to higher start-up costs However, FHL has strengthened its balance sheet in Q1 by paring down debt by Rs 25 bn (net debt currently at Rs 33 bn). This was enabled by DC sale proceeds (~Rs 16 bn) and capital raise (~Rs 8 bn). Deleveraging balance sheet remains the key focus area as FHL has signed an agreement to sell its Vietnam business ‘Hoan My’ for USD 80mn. FY14 debt: equity is expected to come down to 0.7x (1.7x in FY13). Deleveraging (resulting in lower interest cost) coupled with higher number of maturing beds and better margin at SRL Diagnostics to drive turnaround in FY15E. Estimates and valuation We estimate a loss of ~Rs 3bn FY14 (vs loss of Rs 135 mn earlier) and lower our FY15E EPS to Rs 1 (Rs 2.4 earlier) due to faster roll-out of beds leading to higher set-up cost. We reduce our DCF-based target price to Rs 96 (Rs 119 earlier). Rating changed to HOLD (BUY earlier), given marginal upside from CMP of Rs 98. 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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