Shifa International Hospitals Limited

Shifa International Hospitals Limited (PSX: SHFA) was established as a private limited company in 1987 under the repealed Companies Ordinance, 1984. It was converted into a public limited company in 1989. It sets up and runs medical centres, hospitals, pharmacies and lab collection points in various cities of the country.

Shareholding pattern

As at June 30, 2022, over 56 percent shares are owned by the individuals. Major shareholders of the company are Tameer-e-Millat Founda-tion and International Finance Corporation. More than 15 percent shares are held under the category of “others”, followed by 12 percent held in financial institutions. Another almost 11 percent are held under insurance companies, while the remaining roughly 5 percent shares are with the rest of the shareholder categories.

Historical operational performance

The company has consistently experienced a growing topline, while profit margins in the last six years have been fluctuating.

Topline in FY19 registered a growth of 14.4 percent inching closer to Rs 12 billion in value terms. This was largely attributed to the growth seen in the inpatients department which is the prominent contributor to revenue. On the other hand, operating cost reduced to 90 percent of revenue, compared to almost 93 percent in the previous year. Thus, profit before tax margin grew to 9 percent versus 7.5 percent recorded in the previous year. Although net margin also increased, to 6.6 percent, the incline was relatively less pronounced due to higher taxation expense year on year.

Revenue growth in FY20 stood at one of the lowest seen since FY14, at 3.4 percent. The growth was concentrated with the outpatients and pharmacy department, while growth in revenue from inpatients department remained negligible, although it continued to be the major contributor to revenue. But operating costs prevented profitability to improve as profit before tax margin reduced to 6.5 percent, with operating costs consuming over 94 percent of revenue. Although other income increased several folds to Rs 637 million, compared to Rs 44 million in FY19, it was offset by the escalation in operating expense and finance expense. The latter had jumped to Rs 479 million, making up almost 4 percent of revenue. This was due to increase in KIBOR and long-term financing.

In FY21, topline growth stood at one of the highest at 17 percent, with revenue crossing Rs 14 billion in value terms. Revenue from inpatients grew by 11.7 percent, from outpatients by 18 percent and 22.7 percent by pharmacy. Combined with this was the curtailment in costs that reduced to nearly 91 percent of revenue, thereby increasing profit before tax margin to 6.8 percent. However, the increase in profitability is marginal due to significantly lower other income that was abnormally high in the previous year due to gain on disposal of tangible assets and foreign currency translation. This also reflected in the net margin that was recorded at a marginally lower 4.9 percent.

Topline continued to grow in FY22 by almost 14 percent to reach an all-time high of over Rs 16 billion in value terms. Revenue from both, inpatient and outpatient department exhibited growths, by 13.5 percent and 12.9 percent, respectively. Operating expenses increased marginally to over 91 percent of revenue. However, profitability improved with profit before taxation margin recorded at nearly 10 percent, the highest seen in the last six years. This was due to lowering of expense associated with expected credit losses as well as an escalation in other income to Rs 637 million. The latter largely came from an exchange gain on foreign currency translation recorded at Rs 416 million compared to complete absence of the same in the previous year. Thus, net margin also stood at a six-year high of over 7 percent, with bottomline recorded at an all-time high of almost Rs 1.2 billion.

Quarterly results and future outlook

Revenue in the first quarter of FY23 was higher by almost 21 percent year on year. However, this increase did not reflect in profitability as operating costs grew to consume over 91 percent of revenue, compared to nearly 90 percent in the same period last year. The increase was attributed to the general inflationary pressures and the economic conditions. Thus, profit before tax margin for 1QFY23 stood at 10.5 percent compared to 12.4 percent in 1QFY22. Net margin for the current period was also lower at 7.7 percent compared to 10 percent in 1QFY22. The change in net margin was more pronounced due to relatively higher taxation.

The company has been consistently upgrading its facilities. During the period, it began operations with the first phase of Shifa Neurosciences Institute and Dar ul Shifa building. It also has plans for Chemo Daycare and Oncology inpatient projects to be commissioned in the upcoming quarter. This is undertaken with the objective of improving patient flow in addition to managing patients and working burden during the peak hours. Moreover, Sunday OPD clinics were also launched.