Buy Max Healthcare Ltd for the Target Rs. 1,350 by Motilal Oswal Financial Services Ltd
In-line 4Q; ends FY25 with robust growth and network expansion
Gears to increase bed capacity by 32% YoY in FY26
* Max Healthcare’s (MAXH) 4QFY25 financial performance was largely in line with our estimates. It delivered organic YoY growth of 14% in revenues for 4QFY25.
* MAXH significantly scaled the performance of its acquired units, generating revenue/EBITDA of INR2.7b/INR670m from these units in 4QFY25.
* The company has maintained its growth momentum in both Max@lab and Max@home businesses, with each achieving revenue size of INR1.8b/INR2b in FY25.
* We maintain our estimates for FY26/FY27. We value MAXH on an SoTP basis (premised on 35x 12M forward EV/EBITDA for the Hospital business, 30x 12M forward EV/EBITDA for Max@lab, and 11x EV/sales for Max@home) to arrive at our TP of INR1,350.
* MAXH posted strong 19% earnings CAGR over FY22-25, backed by efforts to improve EBITDA per bed and expand bed capacity in targeted micro markets. It has reasonably expanded its offerings while increasing its reach in both diagnostics and home service businesses. We expect MAXH to deliver a 27% earnings CAGR over FY25-27 as it continues to add beds (32% YoY increase in bed capacity expected in FY26) and augment performance at current sites through case mix/payor mix optimization. While land acquisition is in place and past executions provide good visibility for growth, the company still has a sufficient financial war chest, if required, for potential land acquisitions, O&M contracts, or inorganic opportunities. Reiterate BUY.
Robust performance across network hospitals/Max@lab/Max@home
* In 4QFY25, MAXH’s network revenue (including the trust business) grew 28.5% YoY to INR23b (our est. INR22.6b).
* EBITDA margin contracted 120bp YoY to 26.4% (our est. 27.5%), driven by higher other expenses (+475bp YoY as a % of revenue), but offset by lower employee expenses (-420bp YoY as a % of revenue).
*EBITDA grew 23% YoY to INR6.1b (our est. INR 6.2b).
* Adjusted PAT rose 17.7% YoY to INR3.9b (our est. INR4.1b).
* EBITDA per bed (annualized) stood at INR7.3m (-3% YoY and +1% QoQ).
* For FY25, revenue/EBITDA/PAT grew 27%/22%/10% to INR86.2b/INR22.85/ INR14.7b.
* ARPOB stood at INR77.1k in 4QFY25 (-1% YoY). Excluding new hospitals, ARPOB grew 7.4% YoY for 4QFY25. Moreover, occupancy was 75% in 4QFY25.
* The institutional revenue share increased 310bp YoY to 20.8% for 4QFY25.
* Max@lab's revenue was INR420m for 4QFY25 (+20% YoY/10% QoQ).
* Max@home’s revenue was INR560m (+22% YoY, +1.8% QoQ) for 4QFY25.
* Net debt stood at INR15.7b at the end of 4QFY25.
Highlights from the management commentary
* MAXH is on track to add 1,500 beds in FY26, following the addition of ~856 beds in FY25.
* It continues its acquisition spree with ~1-acre land parcel adjacent to its fully occupied 400-bed Vaishali facility, which will add 140 beds over the next 30 months. The current Vaishali facility is operating at 83% occupancy.
* Therapy-wise, Oncology, Orthopedics, and Obstetrics/Gynecology witnessed robust YoY growth of 38%/37%/39% in revenue for 4QFY25.
* International patient revenue grew 28% YoY in 4QFY25, despite a lower patient flow from countries like Bangladesh.
* With newer hospitals serving scheme patients, the share of institutional patients increased in 4QFY25. The company maintains a strong focus on profitability.
* The company generated INR14.4b in cash flow from operations, deploying INR12b toward organic expansion and facility upgrades and spending INR17b on the acquisition of JP Healthcare facilities.
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