Buy Max Healthcare Institute Ltd For Target Rs. 1,300 - Prabhudas Liladhar Capital Ltd
In-line quarter; expansion plan on track
Quick Pointers:
* ~1,500-bed expansion underway in FY26 at Max Smart, Nanavati, Mohali and a greenfield unit in Gurgaon.
* Dwarka unit achieved break-even vs loss of Rs50mn in Q3.
Max Healthcare Institute (MAXHEALT) reported healthy EBITDA growth of 26% YoY to Rs 6.32bn; in line with our estimates. The company showed phenomenal growth (18% EBITDA CAGR) over FY22-24, despite negligible capacity additions. We expect pick-up in the growth momentum given 1) strong expansion plans (+3500 additional beds over FY24-27E), 2) improving payor mix and 3) Bolt on acquisitions like recently added in Lucknow, Nagpur and Noida. Operational efficiency has also been commendable, especially in competitive markets like NCR. Our FY26E/27E EBITDA remains unchanged and we expect EBITDA/PAT to grow ~2x over FY24-27E. We ascribe 35x EV/EBITDA based on FY27E. Maintain ‘BUY’ rating with TP of Rs. 1,300/share.
* In line EBITDA, existing units EBITDA grew by 13% YoY: Base business’s EBITDA improved 13% YoY to Rs. 5.65bn with margins flat YoY to 27.2% in Q4. During Q4, total of 188 additional beds were commissioned across Lucknow, Dwarka, and BLK. The greenfield Dwarka facility, which was commercialized in Q2, achieved EBITDA breakeven in Q4. New units which now comprise of Noida, Lucknow and Nagpur contributed EBITDA of Rs 670mn (vs Rs 650mn QoQ). Overall margins were flat QoQ to 27.2%. Consol occupancies were steady YoY and QoQ at 75% given the new beds consolidation. ARPOB was flat YoY and improved ~2% QoQ to Rs 77.1K. Existing units ARPOB came in at Rs83.8k; up 7% YoY.
* Robust revenues across existing and new units: Consolidated revenues came at Rs. 23.3bn (up 29% YoY); of which Rs.1.2bn, Rs. 1bn, Rs. 780mn and Rs. 550mn were contributed by Noida, Lucknow, Dwarka and Nagpur units respectively. Revenue growth from existing units were at 13% YoY. Institutional revenue share was at 20.8%. Max Lab and Max@Home revenue stood at Rs 460mn and Rs 560mn respectively. During Q4, net debt decreased by Rs. 320mn QoQ to Rs15.8bn.
* Key con-call takeaways: Expansion plans- Three new brownfield towers at Max Smart, Nanavati, and Mohali (combined ~1,500 additional beds) will be operational over the next 3 months, with the Gurgaon greenfield facility on track for completion by FY26 end. Dwarka (303 beds): Newly operationalized asset light unit reported Rs 1.71bn of revenues and Rs 290mn of EBITDA loss for FY25. An additional 68 beds are set to be operationalized, with plans to expand further by 200 beds. Plans to commission Onco block in Q3FY26. Jaypee Noida: Reported Rs 2.28bn in revenue with a 21% EBITDA margin. Further margin expansion is expected through benefit from higher ARPOB and utilization. Lucknow (Phase 2): Added 128 beds on 9-12 floors through internal configuration along with 35 bed addition was done in May and plans to add another 39 beds in a year. Mgmt plans to add Onco block by Q2FY26. Nagpur (127 beds): 12 beds added in Oct 2024 and for balance beds are pending for EC approval; completion expected in 24 months. Sec56, Gurgaon (501 beds): Structural work in progress, 1 st phase with 300 beds expected to be completed by end of Q3FY26. Nanavati (Phase 1 with 268 beds): Interior work in progress, expected commissioning in the next 90 days. Mohali (155 beds): Finishing work underway, expected commissioning in the next 90 days and plans to add 45beds post-internal reconfiguration. Zirakpur, Mohali (asset-light) 400 beds: Awaiting EC approval; tendering initiated and expected completion in the next 30 months. Max Smart (400 beds): Delayed by a quarter with interior and fit-outs ongoing; on track for completion in Q2FY26. MAX Vikrant (550 beds): Awaiting Forest department clearance for tree transplantation and guided completion by 2028. Max Vaishali (Brownfield) 140 beds - Land parcel acquired, drawings underway and expected completion in ~30 months. Currently existing unit operating at 83% occupancy. Capex of Rs 11.8bn deployed in FY25 towards ongoing expansion projects and upgradation of facilities at acquired hospitals. While generated free cash flows from operations of Rs. 14.5bn and distributed divided of Rs. 1.5bn for FY25. International patient revenue was at Rs 2bn; up 28%YoY despite reduced footfalls from Bangladesh and Yemen due to geopolitical challenges. The segment continues to be a key growth lever.
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