Buy Global Health Ltd for the Target Rs. 1,630 by Motilal Oswal Financial Services Ltd
Performance above est.; record revenue for the quarter
Operating efficiency/capacity expansion to drive further growth
* Global Health (Medanta) delivered better-than-expected 1QFY26. Improved performance in mature as well as developing hospitals led to a 7%/6%/11% beat on our sales/EBITDA/PAT estimates for the quarter.
* Medanta achieved its highest-ever quarterly revenue, supported by increased patient volumes and improved realization.
* Notably, 1QFY26 is the first quarter to witness an increase in ARPOB in Patna, led by improved efficiency. This resulted in a dip in Average Length of Stay (ALOS). However, the performance was partly offset by an increase in the share of institutional patients at Lucknow, affecting ARPOB for developing hospitals.
* Medanta also saw improvement in international business in 1QFY26, led by patient flow from Africa/CIS countries.
* After establishing hospitals in Lucknow and Patna in CY19 and CY21, respectively, Medanta has expanded the bed capacity to 757 and 490 beds to date, with potential for further expansion at these locations.
* We broadly retain our estimates for FY26/FY27. We value Medanta at 30x 12M forward EV/EBITDA to arrive at our TP of INR1,630.
* In addition to improving efficiency across existing hospitals in Gurgaon, Lucknow, Patna, and Ranchi, Medanta is further expanding bed capacities to cater to the rising demand in these micro-markets and experience a strong brand recall. Further, Medanta is adding beds within ~50Km radius at Noida/ Ranchi to extend its service offerings and serve a higher number of patients. The cost is expected to be calibrated based on the specialty/therapies offered and pick-up in occupancy.
* We estimate a revenue/EBITDA/PAT CAGR of 15%/18%/24% over FY25-27. Reiterate BUY.
Revenue growth of 20% & PAT surge of 41% mark a robust start to FY26
* In 1QFY26, sales grew 20% YoY to INR10.3b (vs. our est: INR9.6b).
* EBITDA margin expanded 60bp YoY to 22.8% YoY (our est: 23%).
* Medanta’s EBITDA grew 23% YoY to INR2.3b (our est: INR2.2b).
* In 1QFY26, ARPOB grew 4% YoY to INR66.5K.
* Both IPD and OPD volumes increased 14% and 13% YoY, respectively.
* Occupancy levels stood at 63% (vs. 59% in 1QFY25) and 61% in 4QFY25.
* Mature hospitals' revenue (66% of total revenue) grew 10.7% YoY to INR7b.
* EBITDA stood at INR1.6b, and the margin contracted 90bp YoY to 23.7%.
* Developing hospitals’ revenue (34% of total revenue) grew 36% YoY to INR3.2b. EBITDA stood at INR940m for the quarter, with margins expanding 440bp YoY to 29.3%.
* Medanta had 1) a one-time gain of INR196m related to the reversal of interest liability on Export Promotion Capital Goods (EPCG); and b) ESOPrelated opex of INR79m in 1QFY26.
* Adjusting for the same, PAT grew 41% YoY to INR1.5b (vs. our est: INR1.3b)
Highlights from the management commentary
* The 300-bed Noida hospital would be operationalized by 2QFY26. ? The 110-bed Ranchi hospital commenced operations in Jul’25.
* While there have been reductions in international patients from Bangladesh, Afghanistan, and Iraq, there has been an increase in patient flow from Africa and CIS countries.
* About 11-12% of revenue at Gurgaon hospital is from international patients. Hence, there is a limited impact of international patients on the increase in ARPOB on a YoY basis.
* The developing hospitals witnessed a slight YoY decline in ARPOB due to an 11% reduction in ARPOB at Lucknow. This was offset to some extent by an 8% YoY rise in ARPOB of Patna.
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