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In Q1FY25, Medanta's performance was below expectations. Revenue reached INR 8,611 mn, showing a growth of 11.4% YoY and 6.5% QoQ. The ARPOB for matured hospitals grew by 3.2% YoY to INR 67,160, while for developing hospitals, it declined by 1.7% QoQ to INR 58,205. Occupancy for developed hospitals came in at 63%, compared to 60% last year, whereas for developing hospitals, it was 52% versus 54% last year. Consolidated EBITDA increased by 4.7% YoY and 3.9% QoQ to INR 1,863 mn. However, the EBITDA margin contracted by 137 bps YoY and 54 bps QoQ to 21.6%. Consolidated ARPOB stood at INR 64,035, flat YoY. PAT grew by 4.2% YoY but declined by 16.6% QoQ to INR 1,063 mn.

* Medanta enters Mumbai with a 500 bed facility: The company has been awarded 2.2 acres of prime land in Oshiwara, Mumbai, by MHADA for INR 125.11 crores in a public auction. The company plans to build a super-specialty hospital on this site, with an expected capacity of over 500 beds. The project is estimated to cost around INR 12,000 mn and is anticipated to commence operations in 3-4 years. The company is currently in the process of acquiring the necessary approvals to complete the transaction, and the facility will be developed as a pure greenfield project.

* Medanta Expands in NCR: Noida Hospital aims to enhance its dominance in the NCR region. The greenfield project, which features a 550-bed capacity, has completed 97% of its superstructure work and is scheduled to commence operations with 300 beds by Q4FY25/Q1FY26. Further, to bolster its presence in the NCR, the company has partnered with DLF to establish a joint venture for a 400-bed super-specialty hospital in South Delhi. Medanta will operate the hospital and have control over its operations, while DLF will act as a strategic investor. With this expansion, Medanta's bed count in the NCR region is expected to rise to approximately 2,400. This growth is anticipated to further elevate Medanta's ARPOB, given that a reputed hospital nearby operates with an ARPOB in the 65-70k range.

* Indore and Patna Facilities: The company has experienced strong demand and growth at its Patna hospital, which recently added 18 dialysis beds. It plans to increase its capacity by adding 56 ICU beds and 18 chemo care beds in Q2FY25, with an additional 50 beds scheduled for H2FY25. Meanwhile, the Lucknow hospital is set to introduce 300 beds in collaboration with a real estate partner, covering all major super specialties.

* Outlook & Valuation: We maintain a neutral stance on MEDANTA due to expected margin pressures over the next few years, driven by ongoing expansion plans and no tariff increases for the current fiscal year. We forecast Medanta's revenue and EBITDA will grow at CAGRs of 21.6% and 23.0%, respectively, for FY24-26E. The company is in a capex phase, planning to invest INR 1,000-1,200 crore over the next two years, which may impact margins during FY25- 27E when the Noida facility begins operations. Based on these factors, we value the stock at 27x EV/EBITDA for FY26E, resulting in a target price of INR 1,246 per share and a BUY rating.

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