Buy HealthCare Global Enterprises Ltd For Target Rs. 800 by Prabhudas Liladhar Capital Ltd
Growth to sustain despite trade margin cap
HealthCare Global Enterprises’ (HCG) Q2 consolidated EBITDA adjusted for new unit losses grew by 17% YoY to INR 1.42bn; in line with our estimates. Mgmt reiterated higher EBITDA growth than historical growth in coming years. HCG’s asset-light approach with a focus on partnerships has made its business model more capital efficient and scalable, in our view. We believe the recent strategic investment by KKR and exit from low margin fertility business will bring in more operational and financial efficiency. Currently, HCG enjoys ~14% PRE IND-AS margin, which is lower than its peers. We expect KKR to drive growth through bed expansion largely brownfield, better payor mix, focused marketing initiatives and scale up of margins. Our FY28 and FY29E EBIDTA stands reduced by 2-4%. We expect ~22% EBITDA CAGR over FY26- 29E. At CMP, the stock trades at attractive valuations of 15x EV/EBITDA adjusted for rentals and minority based on Sept 2028. Recommend ‘BUY’ rating with a TP of Rs800/share valuing at 20x on Sept 2028E EV/EBITDA.
In line EBITDA; Adj for new unit losses, EBITDA growth was 17% YoY:
HCG reported post-IND AS EBITDA of INR 1.36bn, up ~11% YoY with OPM of 18.6%. The North Bangalore unit reported a loss of INR 61mn vs loss of INR 70 mn QoQ. Adj for new unit loss, ESOPs cost and Milann divestment, EBITDA was up by 17% YoY to INR 1.42bn; in line with our est. Employee cost increased ~22% YoY to ~INR 1.14bn, while consultancy charges increased by 18% and other expenses increased by ~9% YoY. Resultant PAT decreased sharply by 71% YoY to INR 48mn due to the one-time EPCG (Export Promotion Capital Goods Scheme) provision of ~INR 116mn in Q2. Adjusted to this, PAT was improved ~1% YoY
Healthy ARPP & IP volume growth of 7% & 9% YoY; respectively:
Cluster wise, East grew by 23% YoY, South grew by 18% YoY and West grew by 10% YoY. While international (Kenya) grew by 54% YoY INR 302mn; driven by stronger patient inflows for radiation and medical oncology. ARPP grew 7% YoY to ~INR 88.8k/per day. Overall, India volumes grew by 9% YoY in Q2. Non- Institutional mix increased by 325bps YoY to 69%. Total 25 beds got operational in Q2FY27, across Kenya, Kolkata and Nagpur, taking total bed additions to 146 in H1FY27.
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SEBI Registration number is INH000000933
