Add Max Healthcare Institute Ltd Institute Ltd for the Target Rs. 1,250 by Emkay Global Financial Services
Max Healthcare’s Q1FY26 print was marginally below street/our expectations despite revenue/EBITDA growing 27%/23% YoY, respectively. With the company likely to add ~1,100 beds in FY26E, margin trajectory may remain volatile in the short term. However, since a majority of these additions are brownfield and given the company’s demonstrated track record in ramping up such facilities, we expect 20% revenue CAGR over FY25-28E on OBD/ARPOB CAGR of 17%/2%, respectively. We note that the company has ample levers like an improving payor mix (following breakeven in upcoming facilities), case mix (radiation oncology in Dwarka and Lucknow), and focus on international patients which pose as upside risks to our estimates. Factoring in the Q1 margin miss, we trim FY26/27 EBITDA estimates by 4% each, while keeping our TP of Rs1,250 (SoTP-based methodology) unchanged on account of rolling forward to Jun-26E. We retain ADD on Max Healthcare, as we believe the strong valuations (the CMP implies ~25% premium to the sector) adequately capture the industry-leading metrics that the company continues to deliver.
Revenue momentum continues
Max reported network revenue at Rs24.5bn (+27% YoY), in line with our estimate, as IP volumes grew 26%, while overall ARPOB growth remained modest. EBITDA was reported at Rs5.8bn (+23% YoY), with the margin contracting by 80bps YoY as direct costs grew 33% YoY and other expenses by 29% YoY (including a one-off of Rs120mn). Owing to higher D&A, PAT came in at Rs3.4bn (+17% YoY). Maxlab/Max@Home reported revenue growth of 19%/22% YoY, respectively. FCF was Rs3.9bn and net debt as of Jun-25 at Rs17.6bn. Capex was Rs4.4bn.
Earnings call highlights
1) Project commissioning timelines – Nanavati: Phase 1 with 268 beds to be commissioned in the next few weeks. Max Smart (400 beds): Phase 1 is on track for commissioning at Q2FY26-end; Lucknow: 107 beds to be added in FY26 (32 ready for commissioning), with the addition of an oncology block. Gurgaon Sector 56 (500 beds): Commissioning delayed to FY26-end (from Q3FY26 earlier); Vaishali: Rs1.3bn spent on land purchase for an additional 140-bed expansion in ~30 months. Dehradun: A lease agreement was signed for a built-to-suit 130-bed hospital, with expected commissioning by FY28-end. The hospital will focus on advanced oncology (including radiation therapy), which is currently unavailable at its existing facility. 2) The management is optimistic about the oncology outlook and is expecting an increase in its revenue share, on addition of radiation oncology bunkers in Q3 in Dwarka and Lucknow hospitals. 3) The company implemented annual salary hikes in Q1 and added staff for its upcoming brownfield projects which led to some impact on margins. 4) Net debt is expected to inch up by Rs4- 5bn by FY26-end for the ongoing projects; however, net debt/EBITDA to remain below 1x. 5) The company is divesting non-core Chitta and Anupshahr hospitals for Rs400mn (by Sep), allowing focus on super-specialty care in core geographies.
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