Add Max Healthcare Ltd for the Target Rs.1,125 by Emkay Global Financial Services Ltd
Max Healthcare’s (Max HC) Q4FY26 print was largely in line with our estimates, as network revenue/EBITDA grew 10%/18% YoY, respectively. Revenues were impacted by the discontinuation of select high-value chemo drugs for institutional patients; however, ex-oncology IP revenues grew 15% YoY. Given that ~75% of the planned bed additions over the next two years are brownfield in nature, we expect execution risks to be limited. Further, the management remains focused on progressing its greenfield expansion plans (primarily the Gurugram Sec-56 and new Lucknow units), underpinning Max HC’s long-term growth potential. With Max HC’s proven track record of rapidly ramping up new units, we expect 20% revenue CAGR over FY26-28E, driven by OBD/ARPOB CAGR of 15%/5%. Factoring in the Q4 results and commissioning-related delays, we trim our FY28 revenue/EBITDA estimates by 1%/3%. We retain ADD, with unchanged Mar-27E TP of Rs1,125 (SoTP methodology), implying 28x Mar-28E EV/EBITDA (~20% premium to the sector average).
In-line quarter impacted by chemo drug discontinuation
Max HC reported 10% YoY growth in network revenue to Rs25.4bn, in line with our estimates and 3% below street estimates. OBD grew 6% YoY, while overall ARPOB rose 4% YoY, despite an unfavorable mix impact following the discontinuation of chemo drugs due to restrictive CGHS pricing. EBITDA grew 18% YoY, at Rs6.9bn; margin expanded by 178bps YoY to 27.3%. Adjusted PAT came in at Rs3.9bn (+3% YoY) on account of decline in other income and higher depreciation/interest/tax expenses (+19/31/47% YoY). Maxlab/Max@Home reported revenue growth of 14%/30% YoY, respectively. FCF stood at Rs5.8bn in Q4, while net debt was Rs19bn (Mar-26). FY26 capex spends totaled Rs16bn. The company announced a final dividend of Rs2/share.
Outlook and risks
We believe Max HC is approaching an inflection point where its expansion pipeline is set to translate into earnings growth. Despite the phased commissioning of brownfield expansions across Mohali, Nanavati, and Saket during FY26, the network demonstrated the strength of its underlying demand by sustaining occupancy above 75%. As these units achieve full operationalization over the coming quarters, we expect operating leverage to kick in. Beyond FY27, the commissioning of the Gurugram Sector-56 greenfield project and the Shaheed Path Lucknow hospital, alongside the brownfield expansion of the existing Gomti Nagar unit, is expected to drive the next leg of growth and remains a key monitorable. Additionally, the full impact of CGHS benefits is yet to flow through (Rs1.1bn annualized run rate already realized, Rs250-300mn pending), providing further incremental upside. With a strong leverage position (net debt to EBITDA <1x) and FCF generation of Rs15.4bn in FY26, Max HC is well-capitalized to execute its expansion pipeline while maintaining financial flexibility for potential M&A. Key risks: Delay in the commissioning of greenfield projects, rising doctor costs, and any adverse regulatory ruling for healthcare services.
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