IGI Logo

Three geographies driving sustainable growth:

NARH is well-positioned for sustained growth, supported by the expansion of its integrated hospital-clinicinsurance ecosystem in India, improving profitability in Cayman and an operational turnaround in the UK. Focussed capacity expansion, disciplined capital allocation and operational efficiency are expected to drive stronger earnings and a sustainable profitable growth across all three businesses

Strong revenue growth and PAT beat offset margin compression

* Revenue grew significantly by 73% YoY and 6.0% QoQ to INR 28.4Bn (vs CIE estimate of INR 28.7Bn), driven by the highest ARPP in the quarter

* EBITDA stood at INR 5.5 Bn, up 37.6% YoY and 17.9% QoQ, with margin at 19.5%, (-501 bps YoY/197 bps QoQ ) (vs CIE estimate of 18.4%), due to UK business integration

* Adj PAT grew by 16.6% YoY and 45.3% QoQ to INR 3.0 Bn (vs CIE estimate of INR 2.3 Bn), with a PAT margin of 10.6%.

Strong volume growth to drive earnings momentum:

NARH's India business is positioned for sustained growth, supported by improving patient footfalls, higher throughput and expansion of its existing hospital network. The company will continue prioritising volume growth alongside gradual improvement in realisation, with ARPOB currently at ~INR 55,000, providing scope for a better revenue mix through high-end procedures and robotics. Additionally, reducing ALOS from 4.3–4.5 days towards 4 days over the next 4–6 quarters should improve bed throughput and capacity utilisation. Operating leverage from higher volumes should support sustainable profitability.

Insurance turnaround to strengthen earnings visibility:

Cayman's outlook is focussed on strengthening profitability through integrated healthcare delivery, patient retention and improved insurance economics. The hospital business continues to deliver a strong operating performance, with EBITDA margin exceeding 45%. The management aims to exit unprofitable books, while attracting international patients from other Caribbean markets offers an additional avenue for growth.

Revenue recovery to unlock operating leverage:

Narayana's UK business offers a meaningful medium-term growth opportunity, driven by higher private-patient revenues and potential recovery in NHS contracts from April 2027. It is pursuing cost-efficiency through vendor renegotiations, automation, supply-chain optimisation and GCC operations. Regulatory certifications for its digital platform are expected to be obtained in the next 4–5 months, followed by Atma implementation. Incremental quarterly revenue should improve EBITDA, while management aims to bridge the 4–5% ROCE dilution in the next 5 years.

View and Valuation:

We anticipate Revenue/EBITDA/APAT to expand at a CAGR of 22.3%/22.3%/29.5% over FY26–FY29E. Maintaining our valuation multiple to 20x EV/EBITDA on avg. of FY28–29E, we retain both, our target price at INR 2,500 and a ‘BUY’ rating, on the stock, although we have revised our EBITDA, considering the UK business integration.

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer

SEBI Registration no.: INZ 000160131