Buy Narayana Hrudayalaya Ltd For Target Rs. 2,110- Choice Broking Ltd
INR 3,000Cr India Expansion by FY28: With an INR 3,000Cr expansion pipeline in India, largely completing by FY28 and an untapped 20–25% capacity headroom, NARH is well-positioned for sustained double-digit revenue growth. In India, initiatives like digitization, patient mix optimization, and focus on high-end specialties such as oncology and robotic surgeries will continue to drive ARPOB. The Cayman Islands business remains a strong profit engine, contributing ~25% of NARH’s consolidated revenues.
View and Valuation: We have introduced FY28 estimates and value NARH at an EV/EBITDA of 22x (changed from 24x) on an average of FY27-FY28E basis, with the same target price of INR 2,110 and have upgraded our rating to ‘BUY’ (from ADD). We expect revenue/EBITDA/PAT to grow at a CAGR of 17.1%/20.3%/23.6% over FY25-FY28E. The change in the multiple is due to near-term margin pressure from the new initiatives. But despite that, we expect steady revenue growth and ecosystem synergies to drive sustainable profitability, with key breakeven milestones targeted over the next 12–18 months.
Result came below CIE estimates due to higher integration care expenses
* Revenue grew 12.4% YoY and 2.2% QoQ to INR 15.1 Bn (vs CIE estimates of INR 15.5 Bn), driven by higher ARPOB.
* EBITDA stood at INR 3.8Bn, up 10.9% YoY and down 5.8% QoQ, with margin at 22.4%, (-31bps YoY and -189bps QoQ ) (vs CIE estimates of 23.7%).
* PAT de-grew by 2.6% YoY and flat on QoQ to INR 2.0 Bn (vs CIE estimates of INR 2.4 Bn), with a PAT margin of 13% compared to 15% in Q1FY25.
* Average Revenue Per Patient(ARPP) for Indian facilities stood at INR 148.79K for In-Patients (+14.4% YoY) and INR 4.8K for Out-Patients (+9.1% YoY).
* Cayman ARPP came at $34.3K for IP(+7.5% YoY) & $1.4K for OP(6.7% YoY).
India Insurance Business: Targeting Breakeven by FY27
India’s insurance business has reached a foundational scale with ~6,000 lives insured under its Arya scheme and rapid uptake of the Aditi+ product in Kolkata. Over the next 12–18 months, the company plans to expand distribution into highdensity markets through direct-to-customer models, partnerships with affinity groups, and targeted B2B collaborations. The goal is to transition from ~INR 13 crore in quarterly premiums to a 5x scale over the next 3 years, positioning insurance as a 15–20% revenue contributor by FY30. We expect breakeven at the EBITDA level by FY27, with long-term margins stabilizing in the 5–7% range.
Doubling Revenue to $200 Mn with Regional Expansion in the next 3 Years
Post commissioning the new hospital, Narayana’s Cayman operations are on track to scale revenues from $140 Mn to a potential $200 Mn run rate over the next 2–3 years. Despite initial EBITDA dilution (from 45% to ~40%), we expect steady recovery as volumes ramp up and service mix stabilizes. The strategic focus is on expanding beyond Cayman into the wider Caribbean, with international patients projected to contribute over 50% of incremental growth. Additionally, the integrated Care insurance business in Cayman, though margin-dilutive initially, will support a broader ecosystem strategy, enhancing revenue visibility and patient retention. We believe that the next 6 quarters are critical for reaching operating leverage, with EBITDA margin stabilization anticipated by FY27.
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