Whalesbook
Greenfield Expansion: Challenges and Execution
Prabhudas Lilladher's report notes Krishna Institute of Medical Sciences' (KIMS) progress in managing its expansion phase. While the company reported 4% year-on-year EBITDA growth, this was partly affected by initial costs from new greenfield units. The Electronic City unit, for example, achieved full commercialization in the fourth quarter, showing the company's ability to bring new facilities online. The brokerage highlighted the speed of these new ventures, pointing to KIMS's execution capabilities.
Growth Drivers and Future Profitability
The report details new leadership hires in Karnataka and Kerala, signaling a strategy to accelerate growth in these key areas. This move is expected to improve KIMS's operational efficiency as it expands beyond its core regions of Andhra Pradesh and Telangana. By leveraging a lean cost structure and partnerships with local medical teams, Prabhudas Lilladher believes KIMS can reach breakeven points faster. The brokerage forecasts over 25% Operating Profit Margins (OPM) for the Maharashtra, Karnataka, and Kerala clusters within the next three to four years.
Valuation and Recommendation
While EBITDA projections for FY27E and FY28E are stable, the outlook for Profit After Tax (PAT) has been revised down by 7-10% due to expected higher depreciation and interest costs. Looking ahead, the brokerage anticipates KIMS will achieve a 32% EBITDA Compound Annual Growth Rate (CAGR) from FY26 to FY28E. Based on these growth prospects, Prabhudas Lilladher is maintaining its 'Buy' rating on KIMS with a price target of ₹800 per share. This target is based on a 28x FY28E Enterprise Value to EBITDA multiple.