Shares of Yatharth Hospital & Trauma Care Services fell by 6.77% to ₹612.75 on the BSE after the company reported a slight decline in operating margins for the second quarter of FY25. Despite an increase in overall profits, the margin drop had a negative impact on the stock's performance, causing investors to react.
Q2FY25 financial performance
In its Q2FY25 earnings, Yatharth Hospital reported a strong 11.9% increase in consolidated net profit, which reached ₹30.9 crore compared to ₹27.6 crore in Q2FY24. This growth was attributed to the rise in revenue, which climbed to ₹218 crore, a 28.23% increase year-on-year from ₹170 crore in Q2FY24.
However, despite the overall growth, the company's earnings before interest, tax, depreciation, and amortisation (EBITDA) stood at ₹54.6 crore, up from ₹45.6 crore in the previous year. The EBITDA margin decreased slightly to 25.09% from 26.60% in Q2FY24, which may have contributed to the market's cautious outlook on the stock.
Operating efficiency and key metrics
Yatharth Hospital reported improved occupancy rates of 61% during the first half of FY25, compared to 54% during the same period last year. This growth reflects the hospital's better utilisation of its facilities. Additionally, the average revenue per occupied bed (ARPOB) increased by 10%, reaching ₹30,597 in H1FY25.
The company also made notable strides in its operational efficiency, with working capital days improving to 104 days as of September 30, 2024, down from 112 days in March 2024. The return on capital employed (ROCE) stood at a strong 23%, reflecting the positive impact of its recent acquisition in Faridabad.
Strong liquidity position
Yatharth Hospital maintained a robust liquidity position, with net cash of ₹1,541 million as of September 30, 2024. This gives the company a strong foundation for future expansion and operational activities. The hospital's efforts to maintain a solid financial base while managing growth have been recognised by investors, despite the temporary margin dip.
Stock performance and market capitalisation
Despite the recent stock price drop, Yatharth Hospital has been performing well over the longer term. Year-to-date, its stock has risen by 66%, and it has gained 60.4% in the past year. In contrast, the BSE Sensex has risen by 10.1% in 2024 and 22.5% over the past year.
The company currently has a market capitalisation of ₹5,323.14 crore, with shares trading at a price-to-earnings (P/E) multiple of 61.64 times. The earnings per share (EPS) stands at ₹10.66, indicating strong profitability despite the recent dip in margins.
Investing in stocks for long-term growth
For those looking to invest in stocks, Yatharth Hospital has shown promising growth in the healthcare sector despite short-term volatility. Investors seeking long-term growth might find this stock appealing, given its solid financial performance, strong liquidity, and growth potential within the healthcare market.
However, it's essential to consider fluctuations in operating margins, which can impact stock performance in the short term. In conclusion, while Yatharth Hospital shares faced a decline following its Q2FY25 margin drop, the company continues to demonstrate growth in key financial metrics. Investors interested in the healthcare sector should consider the stock's long-term prospects, especially as it continues to expand and improve operational efficiency.
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