Thread by @suru27

#KMC My 10 min work. Thanks for initiating idea @Coolfundoo as this was not the stock I was mentioning.

Whenever I get new idea, i pass it to some of my in built tools and back of envelope calculation to check if its worth deep diving as we cant go in detail on evert stock

https://twitter.com/Coolfundoo/status/1649287977208627202

Coming to KMC, it has gone through major asset expansion in last 2 years and at visible potential, it should have Rs 100 Cr of net fixed asset

If we look at history, peak net fixed asset turnover has been 2.4 which means, it can do peak sales of Rs 240 cr (say achievable in 3 years from current TTM Rs 147 Cr, thats how usually hospitals scale)

Company currently works on 16% PAT margin. Let us assume a peak case and due to economies of scale, does 18% PAT margin at full revenue potential.

Most players trade at 40x PE. So, most optimistic PE, let us give 40x. This turns out to be most optimistic scenario with Rs 240 Cr

sales, 18% PAT margin = Rs 42 Cr PAT and 42*40 = Rs 1680 Cr market cap after 3 years, thats 19% CAGR

Now, let us take a pessimistic view. As it is new capex, may not be as efficient as old one (city real estate), so, let us say, it does 2.3x blender NFAT. so, Rs 230 Cr revenue.

Let us say, margin stays at same 16%. Let us say, market values it at 25% lesser than mean PE of 40x which is 30x. Now, we get Rs 230*.16 = Rs 37 Cr PAT and 37*30 = Rs 1110 Cr market cap which means a CAGR of 3.5%. So, reality may be somewhere in between

with 10-13% CAGR. Please note that I have not gone through any business level details and this is an approximate exercise just to test attractiveness.

If you have done any deep dive, please share your views with numbers and logic, that will help every reader.

Please note if you do not have rationale and just giving some random price targets, please avoid as it wastes everyone's time, you will be muted/blocked.

Looking for some serious contribution from those who track closely how they look at things panning our and why so. Thanks