Buy HealthCare Global Enterprises Ltd For Target Rs.820 by Prabhudas Liladhar Capital Ltd
Multiple levers for margin acceleration
HealthCare Global Enterprises’ (HCG) Q4 consolidated EBITDA grew by 18% YoY to INR 1.25bn, 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. We expect ~23% EBITDA CAGR over FY26-28E. At CMP, the stock trades at attractive valuations of 19x EV/EBITDA adjusted for rentals and minority. Recommend ‘BUY’ rating with a TP of Rs820/share valuing at 22x on FY28E EV/EBITDA.
In line EBITDA:
HCG reported post-IND AS EBITDA of Rs1.25bn, up 18% YoY; largely in line with our estimates. OPM improved by 110bps YoY to 19.2%. Employee cost was flat YoY, consultancy charges increased by 9% and other expenses increased by 14% YoY. HCG reported a goodwill impairment charge of INR319mn pertaining to the divestment of its fertility business. There was tax write back to tune of INR28mn. Resultant PAT increased sharply by 363% YoY to INR341mn.
Healthy ARPP and Volumes:
Cluster wise, west grew by 13% YoY; east grew by 8% YoY and south grew by 9% YoY. While international (Kenya) grew by 11% YoY. ARPP ex of fertility grew 2% YoY to INR 85k/per day. Overall volumes grew by 9% YoY in Q4 and 12% for FY26. Overall occupancy stood at 58% for FY26, with the South region reporting the highest occupancy at 68%, followed by the East at 57% and the West at 50%. Net debt decreased by INR4.3bn QoQ to INR3.4bn; aided by proceeds from right issue amount to the tune of INR4.25bn. The payment of INR1.5bn towards Vizag acquisition will be reflected in Q1FY27
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SEBI Registration No. INH000000271Accumulate Paradeep Phosphates Ltd For Target Rs.141 by Prabhudas Liladhar Capital Ltd
