Equity Research Report

Prepared By: Gunjan Nimje

Economy Analysis
After a promising start to the decade in 2010-11 with achievement like GDP growth of 8.4 per
cent, bringing down fiscal deficit to 4.7 per cent from 6.4 of GDP in 2009-10, as well as
containing current account deficit to 2.6 per cent from 2.8 per cent in 2009-10. Now the growth
has dipped below 5 percent and Indian policy makers are fiddling as the rupee burns and foreign
investors flee. Rupee has fallen down to 64.12 against the dollar, thats a drop of nearly 14
percent since January. Yields on government bonds have reached the five year high of 9.26
percent. India is facing the risk of its rating being downgraded by various agencies.
The government's budgetary strategy has been repeatedly challenged by a series of
unfavourable developments since 2008, from the global financial crisis to a domestic economic
slowdown, with the problem being exacerbated by Congress's fiscal profligacy. As a result, the
federal government deficit widened from the equivalent of 2.5% of the GDP in 2007/08 to
5.7% in 2011/12. The bad situation can be owing to a host of domestic factors, including
weaker business and consumer sentiment, a poor monsoon season and tight credit conditions.
On a factorcost basis,
Agricultural output growth slumped to an estimated 1.8% in 2012/13 owing to the poor
monsoon season.
Expansion in industrial output decelerated for the second consecutive year, to an
estimated 3.1% from an average of 8.2% a year between 2002/03 and 2011/12. Output
in the services sector, which accounts for nearly 60% of the GDP, grew by 6.6%,
marking a slowdown from an average annual growth of 9.3% in the previous decade.
As a result, headline GDP growth on a factorcost basis is estimated to have slowed to
a ten-year low of 5% in 2012/13.
Exports have grown by less than 1% in the first four months of fiscal 2013-14 despite
a weak INR that is down by over 11% in the same period. Weak global economy is
leading to anaemic export growth.
Imports are up by just 2.6% indicating weak domestic demand. The government and
the RBI are trying hard to bring down the Current Account Deficit (CAD) that was at
record highs of 4.8% of GDP in fiscal 2012-13.
The revenue deficit at the end of May 2013 was higher at 38.1% of the Budget Estimate
(BE) and worsened to 48% of the BE for the current fiscal. The primary deficit, which
is the fiscal deficit less interest payments is not only well above the 50% number for
the comparable period last year but has already touched 84.5% of the estimate for the
year by end May 2013.
The government has raised duties on non-essential imports such as gold and silver
while RBI has made financing of non-essential imports costlier. The weak CAD is seen
as the primary cause for the INR weakness.






Sector Wise Comparison:






The growth forecast for this year remains at 6.0%, but future developments need close
attention. Currently, is seems there is a downside skew to risk in India, though it is still
estimated to expand at a higher level than over the past year, when GDP grew by only 5.0%.
Item 201112(RE) 201213(AE)
- Agriculture 2.8 1.8
- Industry 3.4 3.1
- Services 8.9 6.6
Total 6.5 5
Exports ($ value) 21.8 1.8
Imports ($ value) 32.3 0.4
Inflation (WPI) 8.8 7.2
Current account balance* 4.2 5.1#
Fiscal Deficit (Centre) 5.7 5.2
% Change yoy
Real GDP
% of GDP at market prices
Notes: Forecast Based on Annual Model.
AE: Advance Estimates RE: Revised Estimates * Surplus (+)/deficit
India Economic Data Latest Month
Previous
Month
Month on
Month
Change %
IIP growth % y-o-y -2.20% Jun-13 -1.60% -0.73%
Manufacturing % y-o-y -2.20% Jun-13 -2.00% 0.93%
WPI y-o-y* 5.10% Jul-13 4.86% 0.80%
Exports USD billion 25.83 Jul-13 23.79 8.58%
Imports USD billion 38.1 Jul-13 36.03 5.75%
Trade Balance USD billion -12.27 Jul-13 -12.24 0.25%
Bank deposit growth % y-o-y 13.40% Jul-13 13.80% -0.05%
Bank credit growth % y-o-y 14.90% Jul-13 13.70% -0.18%
Source:CSO, RBI, Government
*Expected
Industry Analysis

India is an emerging economy and rapid growth has brought many changes in the lifestyle and
disease patterns. Resultantly, the Indian Healthcare industry too has grown. But as regards
hospital infrastructure and manpower, India lags behind other emerging economies like China
and Brazil. According to the World Health Organization (WHO), in its World Health Statistics
Report 2012, Indias healthcare industry constituted about 4.2% of GDP in 2009 and the per
capital healthcare expenditure stood at USD 124 (on purchasing power parity basis) as against
the global median of USD 483.
Private equity (PE) and venture capital (VC) investments in the healthcare industry in India are
increasing rapidly. In 2012, the industry absorbed US$ 1.2 billion across 48 deals, according
to a research firm. The hospital and diagnostic centres in India has attracted foreign direct
investment (FDI) worth US$ 1,542.35 million, while drugs and pharmaceutical and medical
and surgical appliances industry has registered FDI worth US$ 9,783.31 million and US$
584.14 million, respectively during April 2000 to December 2012, according to data released
by the Department of Industrial Policy and Promotion (DIPP).
Healthcare providers in India plan to spend Rs 5,700 crore (US$ 1.05 billion) on IT products
and services in 2013, a 7 per cent rise over 2012 revenues worth Rs 5,300 crore (US$ 981.50
million), according to a report by Gartner. It is expected to grow to 3.9 per cent to reach Rs
1,720 crore (US$ 318.52 million) in 2013. The hospital services market, which represents one
of the most important segments of the Indian healthcare industry, is expected to be worth US$
81.2 billion by 2015, as per a RNCOS report.
The Indian Healthcare services comprise of four subsectors Hospital, Pharmaceuticals,
Diagnostic Centres and Ancillary Services such as Health Insurance, and medical equipment
and devices. All of these have witnessed a significant growth over the last few years. Moreover,
the Indian Healthcare Industry is well known world over for low cost and clinical excellence
which bode well from the longer term growth aspects.
Health Insurance is one of the sectors which is expected to do well going forward as it provides
the best of healthcare facilities to individuals at low costs resulting in rise in hospitalization
rates. This is because healthcare even today is beyond the reach of a larger population and
increased penetration of insurance will result in easy access to the best healthcare facilities at
affordable rates.
With an ever increasing population, improved standard of living, higher literacy rate, changing
socio-economic characteristics etc. the demand for better curative and preventive healthcare
facilities is expected to increase. Additionally, rise in income levels, changing demographics
dietary patterns resulting in increased incidence of lifestyle related diseases such as diabetes,
hyper tension, cardiovascular diseases etc. are likely to drive growth for hospitals offering
super speciality care and services. However, changing consumer epidemic profiles, health
related issues, frequent product innovations, lack of adequate infrastructural facilities and gap
in demand supply for skilled professionals such as Doctors, nurses and paramedical
personnel, technological obsolescence and dependence on imports of expensive medical
equipment are certain factors which may impact the performance of companies.

Company Overview

Devaki Hospital was established by Eskeycee Medical Foundations Private Limited in 1978-
79 as a small multi-speciality hospital with 60 beds together with facilities like 24 hour X-ray,
lab etc. Over a period of 12 years the hospital increased its bed strength to 100. The hospital
offers several medical facilities under one roof which are available to the public at affordable
cost. The hospital has also been a pioneer in accident and emergency care and was the first
private hospital (as early as 1978) to take up medico legal cases (involving accident victims)
in Madras. The hospitals location at Mylapore in the heart of the Madras city has further added
to its popularity.
During the span of 12 years the hospital has generated a lot of goodwill. Consequently, the
management of Eskeycee Medical Foundations Private Limited recognised the tremendous
scope for expansion and installation of additional diagnostic and therapeutic equipment which
would ensure the best possible facilities for patients while also yielding monetary benefits to
the hospital. Accordingly, Devaki Hospital Limited was incorporated on 22
nd
August 1990 and
Certificate of Commencement of Business was obtained on 4
th
September 1990.
Its departments:
1. Cardiology Department:
There are the following facilities for non-invasive evaluation of cardiac patients
ECG machine
Echocardiography machine (Aloka) SSD 4000
Treadmill machine (Schillers)
Essential evaluation is carried out by cardiologists on a daily basis.
2. Casualty Department:
There is a casualty Department which is manned 24 hours with a Duty doctor and
Paramedical team. Emergencies and trauma of all kinds are attended to. Specialists
services are sought for wherever the needs arises. Trauma and accident care receives
special attention round the clock.
3. Diagnostic Services:
Laboratory: There is a well-equipped modern laboratory functional round-the-clock
and manned by an efficient staff.
C.T.SCAN and X-Ray machine: A state-of-art CT scan is available for various
diagnostic purposes and manned 24 hours for any emergency services. 24 hours x-ray
services are also available.
Ultrasound machine/Echocardiography: The Aloka system, a modern and state-of-
art machine is used to perform ultrasound evaluation and echocardiography; the
procedures are done by specialists in the field.
Tread-Mill machine: The latest version of Schillers treadmill machine is available for
evaluating cardiac patients. All tests are only done by the cardiologist.
4. Intensive Care Unit:
There is a well-equipped 12-bedded IMCU I ICCU which is manned 24 hours by
efficient, well-trained staff and duty' doctors. There are state-of-art bedside monitors,
ventilators, CPAP machines, defibrillators and other supportive equipment (syringe
pumps, dig infusers, nebulizers,' central oxygen and central suctioning) for handling all
forms of medical and cardiac emergencies.
Peer Comparison:
Ratio
Chennai
Meenakshi
Multispeciality
Hospital Ltd
Apollo
Hospitals
Enterprise Ltd
Fortis
Healthcare
Ltd
Indraprastha
Medical
Corporation
Ltd
Market Cap 3.59 12,591.75 4,530.72 296.55
Book Value 10.80 197.44 91.82 18.65
PE 6.09 43.88 NM 9.80
EPS 0.79 20.63 -5.08 3.30
Price / Book 0.45 4.59 1.08 1.73
Div Yield (%) 0.00 0.61 0.00 4.95
Historical Trends:



Financial Statement Analysis:

RATIOS - KEY FINANCIAL RATIOS
COMPANY/RATIOS/KEY FINANCIAL RATIOS/2549/Chennai
MeenascbCombo10scbCombo20
201203 201103 201003 200903 200803
Key Ratios
Debt-Equity Ratio 0 0 0 5.07 1.2
Long Term Debt-Equity Ratio 0 0 0 4.54 1.01
Current Ratio 0.11 0.18 0.69 0.82 0.91

Turnover Ratios
Fixed Assets 0.73 0.65 0.45 0.17 0.24
Inventory 45.12 49.57 41.9 16.44 16.08
Debtors 35.45 24.54 22.08 21.93 17.95
Total Asset Turnover Ratio 1.68 1.34 0.77 0.26 0.35
Interest Cover Ratio 1.04 0.44 -1.2 -2.75 -3.83
PBIDTM (%) 15.58 9.81 -10.16 -69.59 -50.78
PBITM (%) 11.08 4.91 -17.38 -88.18 -63.47
PBDTM (%) 4.97 -1.42 -24.6 -101.69 -67.36
CPM (%) 4.97 -1.42 -21.79 -87.5 -70.98
APATM (%) 0.47 -6.33 -29.01 -106.08 -83.68
ROCE (%) 10.5 0 0 0 0
RONW (%) 5.91 0 0 0 0
Payout (%) 0 0 0 0 0





COMPANY/RATIOS/VALUATION RATIOS/2549/Chennai MeenascbCombo10scbCombo20
201203 201103 201003 200903 200803 200703 200603 200503 200403
Price Earning (P/E) 5.23 0 0 0 0 0 10.21 0 0
Price to Book Value ( P/BV) -0.66 -1.05 -1.5 13.61 2.72 1.95 1.58 2.65 1.29
Price/Cash EPS (P/CEPS) 5.05 0 0 0 0 64.99 6.95 18.28 0
EV/EBIDTA 7.72 15.86 0 0 0 13.4 7.47 61.86 0
Market Cap/Sales 0.25 0.48 0.9 1.41 2.43 1.54 1.4 1.17 0.59
RATIOS - VALUATION RATIOS - Chennai Meenakshi Multispeciality Hospital Ltd As on 05/08/2013
Equity Valuation

Valuation Approach:
Since the dividends issued by Chennai Meenakshi Multispecialty Hospital Ltd. were on an
irregular time period and most of the time company were running under losses hence we have
used the Price to Earnings ratio method to value Chennai Meenakshi Multispecialty Hospital
Ltd. Data obtained from Capitaline is divided into three phases, First one from 1998 to 2003,
Second phase from 2004 to 2008 (pre-subprime crisis) and Third is 2008 to 2012 (post-
subprime crisis).
We have assigned a fair value of Rs 39.96 per share based on a PER of last 10 years. The stock
is currently trading at Rs 4.81 per share. Seeing the past history of this stock and current
negative economic environment of India, we expect this stock to dive down further.
Since the fair value is quite higher than the current trading price hence the recommendation
BUY

Market Analysis

On Friday, our Benchmark indices opened on a flat note in line with global cues. During
the initial hour, the index drifted slightly lower and then rallied from the lows to close with
more than a percent gain. During the session, except Realty all the other sectors ended in
the positive territory with the Capital goods, Banking, Oil & Gas and Consumer Durables
leading the rally. The Advance to Decline ratio was strongly in favour of advancing
counters. (A=1352 D=975)

Its an F&O expiry week and the usual volatility associated is more or less expected.
Speculation remains on whether the Federal Reserve will pull back on asset purchases in
September. The rupee, which closed at 63.20 on Friday will remain in focus.

Finance Minister P Chidambaram during the weekend reassured FIIs and banks that once
the rupees slide was curbed and stability returns to the currency markets, interest rates
would start falling, according to a report. The market is hoping for the best even as investors
are preparing for the worst. The run in recent times despite unfavourable factors are now
being questioned. Nobody complained when the going was good. The Indian stocks, took
a dive off the cliff on Friday as investors resorted to panic selling. The fear that the
government was about to make it difficult for them to take money out of the Indian market.

The market is likely to follow the usual suspects for cues in the absence of any major
triggers; USD-INR movement, global cues and the monsoon session of parliament will be
eyed. Focus would also be on the minutes of the Federal Open Market Committee meeting
that is due to be out on Wednesday.


Market Snapshot


Major Indices
Indian Market

% Change
Last Close 1 Day 3 Months YTD
Sensex 18,519 1.1 (6.0) (4.7)
Nifty 5,472 1.2 (8.6) (7.3)
BSE 100 5,452 1.1 (9.2) (8.8)
BSE 200 2,170 1.0 (10.0) (10.5)
CNX Midcap 6,641 1.2 (15.1) (21.9)
BSE Small Cap 5,248 0.7 (12.4) (28.9)

Turnover
Trade Value (Rs. Cr)
Cash NSE 12081 (12.9)
Cash BSE 1889 (15.8)
Total Cash 13970 (13.3)
Delivery (%) 41.9 0
Derivatives 199121 379.7

Institutional Activity
Institutional Activity
(Rs. Cr)

Cash F&O MTD YTD
FIIs - 723 (1,846) 63,553
MFs - - 509 (13,837)
FIIs Prov. (149)
MFs Prov. 756

Advance Decline Stocks
Advance Decline Stocks
Advance 805
Decline 475
Unchanged 105
A/D ratio 1.69

Top Gainers (NSE)
Symbol CMP Change % Change
SESAGOA 163.85 10.80 7.1
BHEL 123.40 7.30 6.3
RANBAXY 407.90 23.60 6.1
JPASSOCIAT 35.20 1.35 4.0
AMBUJACEM 165.00 5.45 3.4


Top Losers (NSE):
Company CMP Change % Change
I D F C 94.75 -9.00 [8.7]
Axis Bank 934.10 -47.40 [4.8]
GAIL (India) 295.05 -9.75 [3.2]
O N G C 268.05 -8.65 [3.1]
ICICI Bank 830.45 -22.60 [2.6]