Shalby Limited - IPO Note - Angel Broking

Shalby Limited is Ahmadebad based leading multi-specialty hospital chain offering healthcare services in orthopaedics, complex joint replacements, cardiology, neurology, etc. Currently it has total 11 hospitals. The company operates an asset light model and generates most revenue from Gujarat.

Rich footprint Orthopaedic segment, strong promoter background: Shalby Hospitals has developed rich expertise in the orthopaedic surgeries with its total capacity of 2,012 beds and 841 operating beds. It reported a total 15% market share of all joint replacement surgeries conducted by private corporate hospitals in India in 2016. It's promoter Dr. Vikram Sharma is an orthopaedic surgeon with more than 25 years of professional experience.

Expanding its presence outside Gujarat, 3.0x growth in bed capacity: While Shelby Hospitals derives most of its revenues from Gujarat, it is also gradually expanding its presence outside the Gujarat. It has opened hospitals in Jabalpur, Mohali, Indore and Jaipur and has indicated its plan to open its hospital in Nashik. Company also has healthcare centers in Ethiopia, Kenya, Tanzania, and Uganda in Africa, and two SACE in Ras al-Khaimah and Dubai. Owing to its expansion of hospitals company has seen ~3.0x growth in its total beds from 674 in FY13 to 2012 in FY17.

Strong financial profile, healthy return profile: Owing to its leadership in the joint replacement and asset light model, company has witnessed 9.6% growth in revenue (FY13-FY17). With the strong focus on the cost control, its PAT has grown at a CAGR of 42.3% between FY13-FY17. Average EBITDA margins during this period have been more than 20% indicating superior profitability than peers. Operating ratios such as average length of stay (~4 days), Average revenue per operating bed (~Rs. 33,000) have been consistent while due to the commencement of 9 new hospitals between FY12-FY18, its occupancy rate has declined from 49% in FY13 to 34% in FY17. In FY17, company reported ROE of 23.5% and has been consistently improving. We believe that there is strong room for improvement with 6 hospitals maturing over next two years.

Outlook and valuation: At the upper end of the price band (Rs. 245-Rs. 248), the issue is priced at 42.8x of its FY2017 earnings vs. Apollo hospitals (73.7x) and Healthcare Global (121.2x). On EV per bed, it is available on 3.8x vs Apollo (2.3x) and Healthcare Global at 2.1x. We like its growth story, better returns profile than peers and strong growth prospects ahead.

Shares of A Infrastructure Ltd was last trading in BSE at Rs.87.55 as compared to the previous close of Rs. 92.15. The total number of shares traded during the day was 421 in over 7 trades.

The stock hit an intraday high of Rs. 90 and intraday low of 87.55. The net turnover during the day was Rs. 36870.

Source : Equity Bulls

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