Axis Securities maintains a 'Buy' rating on Krishna Institute of Medical Sciences (KIMS) with a target price of Rs 815. The hospital chain reported a 39.9% YoY revenue increase to Rs 1,344 Cr for Q2FY27, supported by strong volume growth and new facility ramp-ups. Despite margin pressure, management expects profitability to normalize toward 30% as new units mature.
Krishna Institute of Medical Sciences Q2FY27 Update
Revenue grew 39.9% YoY to Rs 1,344 Cr, while Net Profit reached Rs 75 Cr.
Reader Takeaway: Strong capacity expansion drives long-term potential, though short-term margin pressure persists from ramp-up costs and leases.
What just happened
Axis Securities has maintained a 'Buy' rating on KIMS, revising the target price to Rs 815 from Rs 890. The Q2FY27 financials show strong growth in volumes, with IP volumes rising 27% and OP volumes up 23.3% YoY. Average Revenue Per Occupied Bed (ARPOB) also saw a notable increase of 14.9%.
Why this matters
KIMS is in a heavy expansion phase. The Kondapur facility has seen a 70% revenue surge, prompting management to accelerate bed commissioning. Additionally, the company is pursuing an asset-light strategy through O&M partnerships with Arete Hospitals and Westfort Hospital, adding 600 beds to its network. These moves are designed to capture market share in key southern clusters.
The backstory
Margins were impacted in Q2, with EBITDA margins at 19.4%, down 187 bps YoY. Management attributes this to the gestation period of new facilities and higher lease overheads. However, with 27 out of 28 units now EBITDA positive, the management expects operational leverage to push margins back toward the 30% mark within the next 3–4 quarters.
What changes now
Capital allocation is currently focused on consolidating operations and finishing ongoing capex in Secunderabad and Rajahmundry. Management is also evaluating a buyout of the remaining 60% stake in the entity owning the Kondapur facility, which could add ~Rs 400 Cr of debt but provide significant annual pre-tax profit savings.
Risks to watch
Key risks include potential economic headwinds impacting patient volume, high doctor attrition rates that could disrupt facility operations, and the possibility of unplanned capex requirements putting stress on the current net debt of Rs 2,150 Cr.
What to track next
Investors should closely monitor the quarterly margin normalization trend and the outcome of the Kondapur facility buyout proposal.