Add Narayana Hrudayalaya Ltd For Target Rs. 1,900 - Choice Broking Ltd
Positive Traction in Cayman Reinforces our ADD outlook:
With INR 3,000 Cr India expansion pipeline (majority to be completed by FY28) and untapped 20– 25% capacity headroom, NARH is poised for double-digit revenue growth. Cayman business, already delivering $180M+ revenue run-rate at 45% EBITDA margin (contributes ~25% of the total revenue), offers global scalability, and strong cash flows ensure self-funded growth.
View and Valuation:
We value NARH at an EV/EBITDA of 22x (changed from 18x) on a FY27 basis, with a revised target price of INR 1,900 (from INR 1,460) and have upgraded our rating to ‘ADD’ (from HOLD). We expect revenue/EBITDA/PAT to grow at a CAGR of 16.5%/19.4%./26.6% over FY25- FY27E. We have increased our EPS estimates by ~30% due to change in the tax rate from 25% to 16% for the coming years. The change in multiple reflects our projected double-digit revenue growth, EBITDA margin improvement driven by the Cayman Bay facility ramp-up (contributes ~25% of the total revenue), and high return ratios compared to peers (refer exhibit 1).
Revenue Came In-line with Estimates, PAT Missed due to Higher Tax Rate
* Revenue grew 15.3% YoY and 8% QoQ to INR 14.8 Bn (vs consensus estimates of INR 14.6 Bn), driven by higher ARPP.
* EBITDA stood at INR 3.6Bn, up 21.4% YoY and 16.5% QoQ, with margin at 24.2%, (+122bps YoY and 178bps QoQ ) (vs consensus estimates of 23.1%).
* PAT grew by 2.9% YoY and 1.7% QoQ to INR 2.0 Bn (vs consensus estimates of INR 2.5 Bn), with a PAT margin of 13.3% compared to 14.9% in Q4FY24.
* Average Revenue Per Patient (ARPP) for Indian facilities stood at INR 153.9K for In-Patients (+17.2% YoY) and INR 4.8K for Out-Patients (+11.6% YoY).
* Cayman ARPP came at $32K for IP(+10% YoY) & $1.4K for OP(+27.3% YoY).
India Business Set for 12–15% Annual Growth Backed by INR 3,000 Cr Expansion Pipeline:
Over the next 3–5 years, NARH India business is projected to grow at 12–15% CAGR, driven by a planned INR 2,800–3,000Cr Capex toward greenfield and brownfield expansion (majority to be completed by FY28). Existing hospitals still operate at 60–65% occupancy, leaving headroom for 20–25% organic volume growth through throughput enhancement, day-care models, and procedural upgrades. We expect that the payer mix shift toward higher-margin private and semi-private beds is expected to lift EBITDA margins further, while domestic volume growth will continue to offset de-emphasized low-margin international business. With INR1,000+ crore annual cash flow, Capex will be funded primarily via internal accruals and long-term debt.
Cayman Business Positioned for $200M+ Annual Revenue with Scalable Premium Model:
NARH Cayman business is well-positioned to scale beyond $200Mn annual revenue, building on its new Cayman Bay facility and a premium multi-specialty model. With a current run-rate of $44Mn per quarter, we expect that the business has strong momentum, supported by early success in high-demand departments like trauma care, women’s health, and pediatrics. With 45% EBITDA margins, this business delivers among the best profitability. The plan is to replicate this across similar geographies.
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