Ever Green Theme

Mr. Anil Kapoor, Bollywood hero is known as Ever Green Hero for his longevity in the Industry, his youthfulness, enthusiasm and giving blockbuster hit movies.

Similarly, there are some themes which are Ever Green themes to invest in the Equity markets. This particular theme does not go out of flavor, does not become redundant in any years; in fact role of this Theme and Sector is becoming stronger and more valuable as the years go by.

Many factors to the success of the Theme can be attributed to Human Race itself and its self- destruction path, life style issues, pollution levels, global warming and many more reasons. Have you guessed this Theme?

It is none other than Health Care Theme

Please remember and understand that Health Care is an all-encompassing theme- including Pharma. One such scheme which came to my attention is DSP Health Care Fund. This scheme will cover themes like Pharma, US Medical Equipment Companies, Health Insurance, Diagnostic Laboratory Companies and even Hospitals. This makes this Scheme an All Season-Evergreen Theme.

Scheme Construct and its Rationale:

• Domestic Focused Companies – (30-40% Allocation): Indian healthcare sector, one of the fastest growing industries, is expected to advance at a CAGR of 16-17 per cent during 2017-2022 to reach US$ 372 billion by 2022; while medical devices market is expected to cross US$ 11 billion by 2022. Indian healthcare sector stood as the 4th largest employer as the sector employed a total of 319,780 people. The sector is expected to generate 40 million jobs in India by 2020
• Diagnostic Laboratories – (up to 10% Allocation): Current Diagnostic Industry is pegged at $6 billion and likely to grow by 15%-20% CAGR. Life style issues, self-health-awareness, higher disposable income and Health Insurance policies helps this Industry to grow at a rapid pace
• Hospitals – (up to 10% Allocation): Hospital Industry accounts for 80% of the Healthcare market. Hospital Industry in India was a $61.80 billion in 2017 and expected to reach $132 billion by 2023 at CAGR of 16-17%. Currently India has 1.6 million Hospital beds. New Health Care Policy of March 2017 mandates 2 beds/1000 population. This translates to a demand of 2.623 million beds in in the next decade. This market is growing at 12% CAGR
• Health Insurance – (up to 10% Allocation): Government spending on Healthcare supported by “Ayushman Bharat” drive is likely to increase from current 1.3% of GDP to 2.5% of GDP by 2025. This single scheme of the Government has added additional 40 crore new people in the Health Insurance segment. Even Health Insurance Premium Collections has leap frogged from $1 billion in 2008-09 to currently $5.90 billion in 2017-18. This will grow again by leaps and bounds due to Ayushman Bharat scheme of the Government. Indians are getting more aware of the benefits of taking Health Cover (as is evident in the Premium collection figures) v/s spending a sizeable portion of their incomes towards medical emergencies. Currently only 18% of people in Urban areas and 14.1% of people in Rural areas are covered by any kind of Health Insurance. (Source: RSBY, ESIC, MREGA, NSSO). This will change dramatically going forward
• Export Focused Pharma Companies – (10-20% Allocation): China has opened up its doors for Indian Pharma Companies. Currently China spends almost 4% plus of their GDP on Healthcare; this is likely to increase going forward. India will be in a sweet spot to capture a sizeable portion of this growth. However, currently the scheme will be underweight in this segment (10-20% allocation v/s benchmark weight of almost 30%)
• US Healthcare–(up to 25% Allocation): Secular and profitable growth trajectory; US medical devices, where this fund will look to invest, has seen mean revenue and EBITDA growth of more than 9% over past 10 years (INR terms). This segment has no comparable in India or China. US is a leader in this segment

All the above factors point towards a massive growth potential in this sector and gives justification to the theory that this is an Evergreen Industry with huge growth potential going forward as well.

In one of my earlier articles, I had mentioned on how Advisors can select schemes with a Top Down approach (Click Here). DSP HealthCare Fund is one such scheme which ticks all the filters based on this approach viz:

Conclusion

• Based on selection of Schemes/Sectors/Themes on Top Down Approach, DSP Healthcare seems to pass all filters currently which should merit investment
• This is an Ever Green Theme
• Current corrections in mid and small cap stocks gives a great valuation advantage
• Investments in US companies which specialize in Medical Equipment manufacturing gives access to Indian investors to participate in this segment; hitherto not available in Indian context
• 2018 depressed earnings and recovery thereafter will aid in re rating of this Industry
• Government thrust to this sector through Ayushman Bharat will get almost 40 crore new people to be insured with Rs.35,000 crore spend by 2025 will aid this Industry along with Health Insurance companies which form part of the investment pool

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