My Investment Idea No. 5: Shalby Limited

Long Term Investment Idea No. 5

Shalby Limited

1.    Face Value = Rs 10

2.    Equity        = 108.01 Cr

3.    Price          =  Rs 96.2

4.  Shalby Limited is a chain of hospitals specialist in Joint Replacement and Multi-Specialty hospitals. They have total 11 hospitals as of now with 2000 beds in cities like Ahmedabad, Jaipur, Surat, Waapi, Indore, Jabalpur, Mohali etc. In addition, one hospital each coming up in Nashik and Mumbai (175 beds hospital). Total additional 500 beds capacity is being created. In addition, Rs 850 Cr have been earmarked for expansion for next 3-5 years during which plan is to double the bed capacity from 2500 beds to 5000 beds.

5.   Out of 2000 operational bed capacity, 1000 beds capacity has come up in last 2 years. As per Shalby Limited management, in spite of having 70% new capacity, Shalby limited has highest margins in the industry which amounts to 18-20% which would peak out in next 2-3 years. Shalby is also looking for opportunities in Delhi and Kolkata. Shalby Limited is also working with many hospitals in Middle East and South Africa and are in talks with many other hospitals there as well.

6.   As per management, many hospitals want to exit hospital business in India and that is a big opportunity for Shalby Limited as it is a debt free and cash surplus company. It is also a beneficiary of Ayushman Bharat as it has a very efficient cost structure.

7.   Shalby Limited was listed at approximately Rs 250 in 2018 and is now trading at a very attractive valuation at Rs 93.20. The reason for the same was due to the fact that the Profits have been declining since its listing. Half Year FY 2020 results have broken this declining trend as the Profit of Half Year FY 2020 has already surpassed the Total Profit of FY 2019. The details of its results are as given in the succeeding paragraphs.

Company's Result Overview:    

Yearly:

                       Net Sales (NS)/ Net Profit (NP)/ Earning Per Share (EPS)

8.    2017:  Rs 320.20 Cr/ Rs 63.26 Cr/ Rs 5.85

9.    2018:  Rs 382.26 Cr/ Rs 44.01 Cr/ Rs 4.07

       Yearly YoY De-Growth in NP = 30%

10.  2019:  Rs 460.95 Cr/ Rs 32.10 Cr/ Rs 2.97

       Yearly YoY De-Growth in NP = 27.06%

11.  From the above results it is clearly evident that the Profit was on decline since listing at Rs 270.

Quarterly:

12.  Jun 18 (FY 2019): Rs 115.89 Cr/ Rs 12.14 Cr/ Rs 1.12     

13.  Jun 19 (FY 2020): Rs 131.44 Cr/ Rs 23.66 Cr/ Rs 2.19

       Quarterly YoY Growth in NP = 94.89%

14.  Sep 18 (FY 2019): Rs 119.34 Cr/ Rs 3.69 Cr/ Rs 0.34

15.  Sep 19 (FY 2020): Rs 125.73 Cr/ Rs 12.9 Cr/ Rs 1.19

       Quarterly YoY Growth in NP = 249.59%

Half Yearly: 

16.   HY FY 2019: Rs 235.23 Cr/ Rs 15.83 Cr/ Rs 3.31

17.   HY FY 2020: Rs 257.17 Cr/ Rs 36.56 Cr/ Rs 3.38

        Half Yearly YoY Growth in NP = 130.95%

Promoters Stake:

18.   Promoters Holding:     79.43%

Others Stake:

19.   FII/FPI :                      5.41%

20.   Financial Institutions:  0.1%

21.   Mutual Funds:             6.73%

22.   Others:                       8.33%

My Investment Rationale:

23.   From the above, it is evident that Half Yearly Profit of Rs 36.56 Cr of this FY (FY 2020) is already more than RS 32.10 Cr Net Profit of Full FY 2019. Hence, due to change in trend  in Net Profit and the fact that the Company is Debt free and cash surplus, the investment in this Company at this stage appear attractive to me. The Company appears to be on Growth trajectory and should give decent returns in next 2-3 years as the business is going to expand for years to come.

Disclaimer:

24.   Information provided above has been taken from internet and which may or may not be correct. Therefore, do your own research before investing in this stock.

25.  The post written above is not to be taken as a 'Buy Recommendation' by the author for Shalby Limited and no one should take decision to buy this stock based on the information given in this Blog. This blog is written only to publish the views of the author, which could be right or wrong. You must consult a Financial Adviser before buying Shalby Limited.