Buy HealthCare Global Enterprises Ltd For Target Rs.820 by Prabhudas Liladhar Capital Ltd
In-line quarter; growth momentum intact
HealthCare Global Enterprises’ (HCG) Q1 consolidated EBITDA adjusted to one off cost grew by 18% YoY to INR 1.27bn, 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 ~24% 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; Adj for new unit and one-off cost, EBITDA growth was 20% YoY:
HCG reported post-IND AS EBITDA of INR 1.2bn, up ~13% YoY. There was one off EPCGrelated provision of INR 46mn during the quarter. Adj for this one-off expense, EBITDA was at INR 1.27bn; up 18% YoY; in line with our est. Newly commercialised North Bangalore reported a loss of INR 70mn in Q1. Adjusted EBITDA and margins for this new unit loss and one-off expense stood at INR 1.34bn (up 20 % YoY) with OPM of 19 4%; up 120 bps YoY. Employee cost increased ~7% YoY to ~INR 1bn, while consultancy charges increased by 18% and other expenses increased by ~17% YoY. Resultant PAT increased sharply by 190% YoY to INR 138mn
Healthy ARPP and 6% QoQ IP volume growth:
Cluster wise, East grew by 22% YoY, South grew by 16% YoY and West grew by 9% YoY. While international (Kenya) grew by 9% YoY; driven by stronger patient inflows for radiation oncology and PET cases. ARPP ex of fertility grew 2% YoY to ~INR 86k/per day. Overall, India volumes grew by 11% YoY in Q1. Institutional mix reduced by 190bps YoY. Fertility business divested from June 2026, reported revenues and EBITDA of INR 169mn & INR 23mn; respectively. Total 121 operational beds added in Q1 across Bangalore, Ranchi, Borivali, Nashik, Hubli and Kenya.
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