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In Q1FY25, Max Healthcare saw a revenue growth of 19.1% YoY and 7.3% QoQ to INR 19,310mn led by ARPOB growth of 3.1% YoY to INR 77,100 and occupancy at 75%. EBITDA saw a growth of 15.2% YoY and de-grew by 1.8% QoQ to INR 4,940mn. EBITDA margin contracted by 87bps YoY and 236bps QoQ to 25.6%. PAT for the quarter grew by 1% YoY and de-grew by 8.6% QoQ to INR 3,087mn.

*  Launched Max Dwarka, Delhi: Max Super Specialty Hospital in South West Delhi (Dwarka) commenced commercial operations with a 303-bed capacity. Operated under an O&M contract with M/s Muthoot Hospital Pvt Ltd, which owns and constructed the facility, this hospital boasts cutting-edge technology, including advanced imaging and surgical robots. The current focus is on expanding its international patient base and expects most TPA and insurance empanelment to be completed by the end of August 2024. Additionally, a stand-alone oncology block with bunkers is under construction, and the hospital anticipates offering radiation therapy to oncology patients by early FY26. Company expects to break-even in this facility within 6-8 months.

*  International patients: International patient revenue during the quarter was INR 1,580 mn, growing 11% YoY and representing 8.3% of the hospital's total revenue. Patient flows were temporarily impacted by political situations and credit risk management actions. The business anticipates that income from international patients will double in the near future, boosting overall performance. The drop in immigration-related business led to a 48% reduction in OPD footfalls. However, this segment does not significantly contribute to inpatient (IPD) conversions. The impact is expected to persist until Q3FY25, with normalcy anticipated from Q4FY25 onward due to visa regulation changes effective January 1st.

*  Updates for Lucknow and Nagpur Hospitals: Both the Lucknow and Nagpur hospitals are performing well. Refurbishment of the existing facility in Lucknow is underway, and the company is finalizing work to operationalize an additional 140 new beds. Management has also received environmental clearance (EC) approval for constructing a new 450-bed block in Lucknow. The company completed the purchase of Nagpur hospital’s land from the previous promoter in May 2024. Work has commenced to add approximately 25 beds, 3 operating rooms, and endoscopy and bronchoscopy suites through internal reconfiguration in Nagpur. Additionally, an application has been submitted to the EC for approval of approximately 115 beds on two additional floors. The ARPOB for both facilities stands at approximately INR 44-45k.

*  Outlook & Valuation: Max Healthcare is seen favorably due to several strategic factors. 1) a significant capital expenditure cycle is anticipated to enhance ROCE over the next 3-5 years; 2) a rising proportion of international patients; 3) the company's focus on advanced specializations, such as robotics, and an improved payor mix are expected to drive higher revenue and margins; and 4) Max Healthcare is expanding its bed capacity and experiencing growth from both new and existing facilities, contributing to its positive outlook. We value the stock based on the SOTP methodology to arrive at a price target of INR 964 and recommend a BUY rating on the stock.

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