Which Healthcare Stock is Better: Dr Agarwal's Health Care or KIMS?

The healthcare industry in India was valued at US$ 372 billion (bn) in 2023. It's expected to grow to US$ 638 bn by the end of 2025, at an annual growth rate of 22.5%.

Large-scale innovation in hospitals, pharmaceuticals, diagnostics, and medical devices is driving the growth of this industry.

In addition to this, rising healthcare spending by both government and private players after the pandemic indicates a strong commitment to improving healthcare infrastructure and access.

The rising awareness of health issues among the population is also fuelling the demand for quality healthcare services.

To adapt and meet the evolving needs of the country's population, service providers are investing heavily in improving the healthcare infrastructure of the company.

Among them, two companies investing heavily are Dr Agarwal's Healthcare and Krishna Institute of Medical Sciences (KIMS).

Both have a strong presence in South India and plan to expand to other parts of the country.

Let's compare both the companies across various parameters to see who has a better chance to capitalise on this opportunity.

Business Overview

# Dr Agarwal's Health Care

Dr Agarwal's Healthcare, incorporated in 2010, is India's largest eye care service chain with a 25% market share.

It provides a wide spectrum of eye care services and is also engaged in the retailing of optical products, contact lenses, accessories, and eye care-related pharmaceuticals.

The company is the holding company of Dr Agarwal's Eye Hospital and holds a 71.5% stake.

It follows a three-tier business model where the primary facilities are used to offer basic eye care and teleconsultations. The secondary facilities are used as surgical centres for cataract surgeries, and the tertiary centres are used for complex surgeries.

This model allows the company to maximise efficiency and reduce costs by sharing resources.

Dr Agarwal's Healthcare has a dominant presence in the south with 113 branches, followed by west (35), east (11), and north (6).

# Krishna Institute of Medical Sciences (KIMS)

KIMS is one of the largest corporate healthcare groups in Andhra Pradesh and Telangana in terms of patients treated and treatments offered.

Founded in 1973, the company offers multidisciplinary healthcare services in tier 1, 2, and 3 cities.

It offers services in specialities and super specialities in more than 40 fields, including cardiac science, orthopaedics, neuroscience, renal science, mother and child, gastric science, and oncology.

The company has a strong presence in Telangana, Andhra Pradesh, and Maharashtra, and it aims to enter Karnataka soon.

Particulars	Dr Agarwals Healthcare	Krishna Institute of Medical Sciences
Market Cap (in Rs billion)*	12.7	242.9

Source: Equitymaster| *as of 4^th February 2025

Between the two companies, KIMS has a higher market cap of Rs 246 billion (bn). Dr Agarwal's Healthcare, on the other hand, was listed on the stock exchanges today. It was listed on the BSE and NSE.

In terms of the hospital network, Dr Agarwal's Healthcare has a network of 165 facilities across 13 states and 4 union territories. It also has 15 facilities across nine countries in Africa.

So far, the company has served over 1.1 m patients and has performed 140,000 operations since its inception.

KIMS, on the other hand, has 12 multi-speciality hospitals with a bed capacity of 3,900 and 3,500+ operational beds.

In terms of share performance, KIMS share price has risen over 45% in the last year, against the 8% return of the benchmark index, Nifty 50.

Revenue

It's important to track the revenue growth of a company to assess its growth prospects.

Dr Agarwal's earns its revenue majorly from services (64%), followed by sale of products (36%).

In the last five years, the revenue of Dr Agarwal's Healthcare has grown at a compound annual growth rate (CAGR) of 20.2%.

For KIMS, the majority of its revenue is earned from cardiac science (18%), followed by orthopaedics (14%), neuro science (11%), and renal science (9%).

In the last five years, the revenue of KIMS has grown at a CAGR of 17.3% on account of higher average revenue per operational bed (ARPOB) and higher occupancy rate.

Revenue

Net Sales (in Rs m)	Mar-2020	Mar-2021	Mar-2022	Mar-2023	Mar-2024	5-Year CAGR
Dr Agarwals Healthcare	5,310	4,710	6,960	10,180	13,320	20.2%
Krishna Institute of Medical Sciences	11,226	13,299	16,508	21,977	24,981	17.3%

Source: Equitymaster

Profitability

To evaluate profitability, it is important to assess earnings before interest tax depreciation and amortisation (EBITDA) growth, net profit growth, and profit margins. Growing profits and margins are considered a good sign for the business.

In the last five years, the EBITDA of Dr Agarwal's Healthcare has grown at CAGR of 24.2%. The net profit has expanded consistently during the same time.

This is primarily because the company's business model ensures cost efficiency. Moreover, due to sustained growth in revenues, the profitability has also improved.

The gross and net profit margins of Dr Agarwal's Healthcare averaged 27.1% and 9%, respectively, in the last five years.

For KIMS, the EBITDA and net profit have grown at a CAGR of 20.9% and 23.9%, respectively, on account of a higher occupancy rate, the group's established market position, and high ARPOB.

The gross profit and net profit margins of KIMS has averaged 29.4% and 17%, respectively, over the last five years.

Profitability

EBITDA (in Rs m)	Mar-2020	Mar-2021	Mar-2022	Mar-2023	Mar-2024	5-Year CAGR
Dr Agarwals Healthcare	1,240	850	1,860	2,750	3,670	24.2%
Krishna Institute of Medical Sciences	2,556	3,859	5,419	6,366	6,610	20.9%
PAT (in Rs m)	Mar-2020	Mar-2021	Mar-2022	Mar-2023	Mar-2024	5-Year CAGR
Dr Agarwals Healthcare	-110	-480	570	840	1,410	NM
Krishna Institute of Medical Sciences	1,151	2,055	3,438	3,658	3,360	23.9%
Gross Profit Margin	Mar-2020	Mar-2021	Mar-2022	Mar-2023	Mar-2024
Dr Agarwals Healthcare	23.4%	18.0%	26.7%	27.0%	27.6%
Krishna Institute of Medical Sciences	22.8%	29.0%	32.8%	29.0%	26.5%
Net Profit Margin	Mar-2020	Mar-2021	Mar-2022	Mar-2023	Mar-2024
Dr Agarwals Healthcare	-2.1%	-10.2%	8.2%	8.3%	10.6%
Krishna Institute of Medical Sciences	10.3%	15.5%	20.8%	16.6%	13.5%

Source: Equitymaster

Debt Management

It is important to monitor the debt levels of a company. This is because they are fixed financial obligations that a company has to pay irrespective of the profit levels.

The debt to equity ratio of KIMS is 0.5. The ratio has grown primarily because the debt levels have increased from Rs 1.6 bn in the FY22 to Rs 9.3 bn in FY24.

This rise in debt is primarily because of the aggressive plan to invest Rs 20 bn to expand its bed capacity from 3,900 to 5,000 by FY27.

It's opening hospitals in Nashik, Bangalore, Anantapur, Srikakulam, and Ongole. The company is also setting up a speciality hospital in Mumbai with 300 beds with a capex of Rs 5 bn.

Despite all the heavy capex investment, the company has sufficient liquidity, which will be enough to fund routine maintenance capex.

Dr Agarwal's Healthcare, on the other hand, had a debt to equity ratio of 0.7 in FY24.

The company is planning organic expansion by establishing new facilities, deepening its presence in existing clusters, and targeting underserved regions in India.

As it leases most of its facilities, the initial cost of setting up is much relatively low, which ensures debt levels don't go up drastically.

Moreover, it plans to reduce its debt levels by using its IPO (initial public offerings) proceeds to repay borrowings and expand organically.

Moreover, the company has sufficient cash accruals and expects to generate sufficient cash to fund its growth.

Debt Management

Debt to Equity Ratio (x)	Mar-2020	Mar-2021	Mar-2022	Mar-2023	Mar-2024
Dr Agarwals Healthcare	NA	NA	NA	NA	0.7
Krishna Institute of Medical Sciences	0.4	0.2	0.1	0.3	0.5

Source: Equitymaster

Dividend

A company shares its profits in the form of dividends with its shareholders. A company paying consistent dividends indicates it has stable profits.

Both Dr Agarwal's Healthcare and KIMS do not pay any dividends to their shareholders. However, a strong growth in profits with limited reliance on external debt can push these companies to pay dividends in the future.

Financial Efficiency

The two ratios that help in assessing the financial efficiency of a company are return on capital employed (RoCE) and return on equity (RoE).

The 3-year average RoCE and RoE for Dr Agarwal's Healthcare are 16.3% and 16.9% respectively.

On the other hand, the return ratios of KIMS have averaged 24.7% and 21.7%, respectively, in the last three years.

Clearly, KIMS is leading with respect to return ratios.

Financial Efficiency

ROCE	Mar-2020	Mar-2021	Mar-2022	Mar-2023	Mar-2024
Dr Agarwals Healthcare	NA	-1.0%	23.0%	15.0%	11.0%
Krishna Institute of Medical Sciences	21.3%	30.2%	31.4%	24.1%	18.7%
ROE	Mar-2020	Mar-2021	Mar-2022	Mar-2023	Mar-2024
Dr Agarwals Healthcare	-4.4%	-26.1%	26.8%	13.3%	10.5%
Krishna Institute of Medical Sciences	19.2%	23.8%	24.8%	21.9%	18.4%

Source: Equitymaster

Valuations

A company's valuation can be assessed through the price to earnings (PE) ratio and price to book value (PB) ratio.

These ratios help us estimate the intrinsic value of a company. They also help us analyse whether a company's shares are overvalued or undervalued when compared to its peers.

The PE and PB of KIMS are 66.7 and 12.2, respectively, whereas the company's three-year average PE and PB stand at 44.8 and 31, respectively.

Strong growth in revenue and profits and continuous expansion in bed capacity can justify a high valuation.

The PE of Dr Agarwal's Healthcare is around 186, and PB is around 7. Although the shares of the company are not listed yet, the valuations might look pricy when compared to its peers.

However, the company's sustained increase in revenue and profits could justify the high valuation.

When compared to KIMS, Dr Agarwal's Healthcare shares are highly overvalued. They're also overvalued when we compare it with industry averages.

Valuations	Dr Agarwals Healthcare	3-Year Average	Krishna Institute of Medical Sciences	3-Year Average
PE (x)	186.0	NA	66.7	44.8
PB (x)	7.0	NA	12.2	31.0

Source: Equitymaster

Which Healthcare Stock is Better: Dr Agarwal's Health Care or KIMS?

In terms of revenue growth, profit growth, and profit margins, Dr Agarwal's Healthcare is leading.

However, in terms of absolute revenue, profits, debt management, and financial efficiency, KIMS is ahead.

Overall, both companies are gearing up for the next leg of growth.

With the government aiming to provide quality healthcare in the country, and its initiatives to boost medical tourism in India, the healthcare sector has attracted several investments both from within and outside India.

Moreover, as Indian medical consumers are becoming increasingly conscious of their healthcare upkeep, rising income levels and an ageing population are expected to boost the demand for healthcare services in the future.

Although the healthcare sector looks promising for investment, it is important to do thorough research before making any financial decisions.

Investors should also consider corporate governance as one of the criteria for due diligence before considering an investment.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here.