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* Medanta’s expansion is far from over. We forecast its net cash balance to be INR 10bn+ by end-FY26 (based on current expansion plan) implying potential for more capex initiatives in the near future. This expansion could be in UP/ Punjab, as alluded to by the management earlier. Medanta’s Lucknow and Patna facilities have performed exceptionally well and that trend will continue as they achieve full-scale capacity over the next 2-3 years, in our view. In addition, if Noida’s trajectory (FY25 commencement) turns out similar to that of Lucknow, we believe there could be an upside to our earnings estimates. The Indore and DLF JV announcements support our long-term growth thesis; while we await further clarity on the arrangements, our preliminary assessment has been detailed below. Overall, we expect Revenue/EBITDA/PAT CAGR of 18%/20%/24% respectively over FY23-26. We like Medanta’s balanced asset-mix, healthy pipeline and clinical excellence. We value Medanta at 22x Sep’25 EV/EBITDA to derive a TP of INR 835. BUY.

* Sufficient room for further expansion: Medanta’s healthy cashflow generation provides sufficient headroom for expansion. We forecast its net cash balance to be INR 10bn+ by end-FY26 (based on already announced expansion plans) implying potential for more capex initiatives in the near future. The next expansion could be in Uttar Pradesh or Punjab and the management remains open to different business models/ arrangements. However, we note that any large hospital project (900+ beds) could be done via the greenfield route. In addition to Noida (FY25), Medanta has announced a new asset light hospital at Indore and a JV with DLF for a new hospital in South Delhi.

* Balanced expansion to drive sustainable earnings: Medanta’s ~1,000-bed expansion over FY23-26 is balanced - 30% from Noida, 10% from Gurgaon and 60% from developing hospitals. The systematic expansion, in our view, will not dilute existing margins and will provide a sustainable growth trajectory. The increasing share of developing/ new hospitals will drive mid-teens sales growth over the next 4-5 years. While Lucknow margins may continue to surprise positively, change in Patna’s payor mix, bed additions and Noida losses could prevent further margin expansion over the next 2-3 years. Overall, we expect Revenue/EBITDA/PAT CAGR of 18%/20%/24% over FY23-26.

* Strong Lucknow and Patna performance to continue: Lucknow hospital has delivered 61% Revenue CAGR over FY21-23 and EBITDA margin has increased to 34% in FY23 (vs. 28% in FY22). With further bed additions, we expect 26% Revenue CAGR over FY23-26. FY23 ROCE was 18% which, in our view, can increase to 25-30% by FY26. This asset generated INR 1.95bn CFO (~100% EBITDA; 30% of consolidated CFO). Patna has delivered INR 1.7bn revenue with 9% EBITDAM. We expect Patna to deliver 50% Revenue CAGR over FY23-26 as new specialties are added and occupancies ramp up. We estimate current Patna ARPOB to be ~INR 46-48k, which should sustain as addition of complex surgeries to the mix will likely be offset by increase in scheme patients. Accordingly, Patna margin is likely to trend below the company average of 23-24% over the next 2-3 years.

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