Buy Global Health Ltd For the Target Rs.1,348 by Choice Broking Ltd
Beats Estimates on all fronts; driven by an increase in patient volume
* Revenue up by 13.3% YoY but down by 1.4% QoQ to INR 9.4 Bn (vs. CEBPL estimates at INR 8.9 Bn), driven by consistent growth in patient volume to 44,856 (12.9% YoY) and higher contribution from developing hospitals (32% of total revenue).
* ARPOB stood at INR 61.3K, down 1.3% QoQ, and marginally grew by 1.2% YoY, due to change in case mix. Occupancy remained at 63.6% vs 64% Q2FY25
* The company added 34 new operational beds, bringing the total to 2,480 operational beds, with bed capacity of 3,042.
* EBITDA up 12.1% YoY and up 4.2% QoQ to INR 2.4 Bn (vs. CEBPL estimates at INR 2.2 Bn). EBITDA margin contracted by 27bps YoY but expanded by 134bps QoQ to 25.2% (vs. CEBPL estimates at 24.7%).
* PAT increased by 15.6% YoY and 9.2% QoQ to INR 1.4 Bn (vs. CEBPL estimates at INR 1.3 Bn) with a PAT margin of 15.1%.
Medanta to add ~1,000 beds to its capacity over the next 2 years
Medanta has expanded its presence in Ranchi with the addition of a new 110-bed hospital under a long-term lease, located just 1.2 km from the existing facility, expected to be commissioned by the end of Q1FY26. This expansion is expected to enhance capacity to meet the increasing demand in underserved markets. Additionally, Medanta is focusing on further expansions in Noida (550 beds), Lucknow (200 beds), and Patna (150 beds), which will collectively increase its total bed capacity to 4,074 by FY27. The capacity expansion along with the new location will sustain the growth trajectory.
Developing hospitals (<6 years), contributing 50% of the capacity, witnessed above average occupancy of 64%
The introduction of initiatives such as Ayushman Bharat in Lucknow and the PPP scheme in Patna is expected to drive further recovery in hospital occupancy. Given the fixed cost component reflected in overall operating expenses, the resulting operating leverage is anticipated to enhance margins, supported by the complex nature of treatments under these schemes. Additionally, this is expected to mitigate any potential dilution in ARPOB.
View and Valuation:
We have increased our FY26/27 EPS estimates by 9.8%/6.6% and upgraded our rating to ‘BUY' with a target price of INR 1,324, valuing the stock on 27x EV/EBITDA on FY27E. Higher multiple is due to return ratios (high-teens), EPS growth (20% CAGR from FY24- 27E), and operating leverage is expected to drive better margins. We believe growth will be driven by new bed capacities, expansion in new locations, improved occupancy, and steady growth in ARPOB.
ALOS (Average Length Of Stay) stabilizes Revenue grew by 13.3% on a YoY basis
EBITDA improves with improvement in the margin PAT grew by 15.6% YoY with improvement in margin
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