Buy Global Health Ltd For Target Rs. 1,682 By JM Financial Services
Global Health delivered a strong 1Q, beating expectations across metrics. Revenue/ EBITDA/ Pat grew 20%/22%/50% YoY. The EBITDA margins came in at 22%, 38bps YoY improvement. The Top-line growth was enabled by increased patient volumes and improved realisations, with strength across both Mature and Developing units. The Developing units posted a 35.9% YoY growth, led by scheme business. Further, the segment managed to deliver a ~440bps expansion in the EBITDA margin on account of the fixed cost model enabling operating leverage. The improving profile of the Developing units has led to upwards revision in our estimates. Parallelly, the Mature units registered a 10.7% YoY growth – largely driven by ARPOB growth of 9.2%. The flagship Gurgaon unit enabled the realisation growth, facilitated by increasing oncology contribution and ALOS management. On the expansion front, 1Q saw commissioning of the new 110 bed Ranchi unit, with the 500 bed Noida unit expected to begin operations in the coming week. Global Health seems to be on schedule to attain the ~2000 bed expansion guidance it set out. This, along with faster ramp-up in the Developing units, builds in our expected growth of 17%/22%/25% CAGR in revenue/EBITDA/PAT over FY25-28. Thus, we value the company at 32x the June’27 EBITDA to arrive at a TP of INR 1,682. Maintain Buy.
* Key metrics: The company reported a 13.3% increase in occupied days, leading to 63.2% occupancy on higher bed capacity. ARPOB at INR 66,584 was +4% YoY, growth enabled by increase in Gurugram realization and specialty mix change. IP/OP count increased by 14.2%/13.1%. ALOS was largely flat at 3.03 vs 3.05 in 1QFY25.
* Developing Hospitals: The developing units posted a stellar 35.9% YoY growth in topline, reporting INR 3.2bn revenue. The units saw a stronger 59.8% YoY growth in EBITDA (at 29.3%, expansion of ~440bps YoY). The rampant increase in developing hospitals is on account of sustained inflow of scheme business in both units, leading to 39.3% YoY growth in occupied days. However, the dependence on scheme led to 2.6% decrease in ARPOB in these units. Yet, the company was able to expand the margins in these units owing to fixed cost model the units operate on, leading to operating leverage. Noida has been included in developing, operational cost of INR 30mn (50% towards staff cost).
* Mature Hospitals: The units registered INR 7.0bn top-line, a 10.7% YoY growth led by increase in ARPOB. ARPOBs came at INR 73,256, a 9.2% YoY increase. EBITDA saw a YoY growth of 6.7% (margins contracted by ~90bps). The occupied days saw a 1.4% increase YoY, leading to occupancy of 62% on higher capacity.: The units registered INR 7.0bn top-line, a 10.7% YoY growth led by increase in ARPOB. ARPOBs came at INR 73,256, a 9.2% YoY increase. EBITDA saw a YoY growth of 6.7% (margins contracted by ~90bps). The occupied days saw a 1.4% increase YoY, leading to occupancy of 62% on higher capacity.
* Expansion traction: The company commissioned the new Ranchi unit (110 beds) in July. The Noida unit (550 beds) remains on schedule to be commissioned in coming weeks with 300 beds in first phase. The company has already on-boarded 230+ staff for the same. The quarter saw addition 20 beds in the Patna unit, with construction of additional beds in tower B still in progress. During the quarter, the company on-boarded 150+ doctors across the network (including 30+ senior clinicians).
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SEBI Registration Number is INM000010361
