Healthcare HCA 1 Jun 2018 US10432 Rating OUTPERFORM Target P

Healthcare (HCA) 1 Jun 2018): US$104.32; Rating: OUTPERFORM: Target Price: 122.00; Analyst 12/18E 43,614.0 45,768.6 8,596 12/20E Company B 47,645.4 49,606.1 HCA Healtho 9,408 healthcare s Revenue (USS m) Depr, & amort EBIT (USS) Net interest exp PBT (US$) ncome taxes Profit after tax 7,164 Kingdom 6,399 (1,775) 4,624 4,987 5,380 (1,350) 3,062 3,632 Reported net income (US$) Other NPAT adjustments Adjusted net income Cash Flow 3,650 3,650 12/20E 2,535 3,372 3,130 12/18E 6,399 3,372 12/19E 6,787 12/17A (1,690) 5,426 Net interest (1 Change in working capita Cash flow from operations CAPEX Free cashflow to the firm 6,792 (4,270) 2,522 2,752 2,453 (4.279) (2,983) (3,720) Cash flow from investments Net share issuel/irepurchase) (3,573) (1,600) paid Changes in Net Cash/Debt Balance Sheet (USS) 12/17A 12/18E 12/19E 12/20E Cash & cash equivalents 6.822 o 11.241 22,137 347 Our Blue S Our blue sk driven by be free cash flo Total current assets 9.977 11,003 20,466 10,790 Investmment securties Total assets 36,593 38,100 Total current liabilities Total Ilabllities 6,699 41,781 7,715 Our Grey 42,298 Our greyS 42,159 39,769 12/19E (4,995) (3,680) 2.390) 36,593 32.326 31245 30,87330419 a repeali (809) 41,489 by rising c and volum Total liabilities and equity 12/18E 12/20E

Solution

The company is profitable because in all of the four years mentioned in the financial statements the company has been able earn profit from its business operations. Not only the company has earned profit in all the four years as reported in the financial statements but in fact the company has been quite successful in improving its financial performance as can be seen in the table below that year after ear the company has improved its revenue, EBIT and net adjusted profit.

Year

12/17A

12/18A

12/19A

12/20A

Revenue

   43,614.00

   45,768.60

   47,645.40

   49,606.10

EBIT

     8,233.00

     8,596.00

     9,003.00

     9,408.00

Adjusted net income

     2,535.00

     3,130.00

     3,372.00

     3,650.00

However, despite the profit the cash flow statement of the company is quite depressing as the company has struggled to have positive cash flow from business. But even the cash flow position of the company has also improved as year after year the company has improved its ability to generate positive cash flow from business, investing and financing activities. In 12/17A where the company had a negative $1,596m from business the company had $1,081 positive net cash flow from business in the very next year. Though after that the net cash flow from business has deteriorated but it has not been negative ever since.

The balance sheet of the company also shows that the negative equity shareholders’ fund has also reduced each year. Thus, there is absolutely no doubt about the fact that the company is a profitable company and is improving its financial performance and position each year since 12/17A.     

Year	12/17A	12/18A	12/19A	12/20A
Revenue	43,614.00	45,768.60	47,645.40	49,606.10
EBIT	8,233.00	8,596.00	9,003.00	9,408.00
Adjusted net income	2,535.00	3,130.00	3,372.00	3,650.00