Buy Park Medi World Ltd for the Target Rs 375 by Emkay Global Financial Services Ltd
Park Medi World (Park) delivered a strong performance in 1QFY27, with revenue/EBITDA growing 19%/20% yoy. Park continues to replicate its agile acquisition playbook, allowing it to further strengthen its dense cluster strategy, now in the Punjab Tricity belt, with the recently announced acquisition in Zirakpur (~15-20km from its existing Mohali facility). Management’s laser like focus on profitability (1Q PATM expanded by 156bps yoy) and ramp-up of its new units (Panchkula, Rudrapur, Agra – 960 beds) lend comfort on its FY27 guidance. Further, improving case mix (CONGO mix improved by 520bps yoy) and CGHS rate revisions percolating over the remainder of the year should offset the investments in/drag from new hospitals. Given visibility on ~1.8k bed additions over the next 18 months, we expect revenue CAGR of 25% over FY26- 29E. Factoring in the 1Q beat and Zirakpur acquisition, we revise our EBITDA estimates by 4% each for FY28 and FY29. We maintain BUY and revise up our Jun-27 TP by ~7% to Rs375 from Rs350, based on 21x Jun-28E EV/EBITDA.
Strong performance; CGHS rate revisions and CONGO mix aid ARPOB trajectory
Park reported topline growth of 19% yoy (Rs4.8bn) in 1Q, led by ARPOB growth of 12% yoy on the back of CGHS rate hikes. IP volumes grew 16% yoy, while OP volume growth stood at 17% yoy. ALOS improved from 6.4 days in 1QFY26 to 5.9 days in 1QFY27. , However, occupancy declined to 55.6% in 1QFY27 (1QFY26: 67.8%) owing to new bed additions (bed capacity increased 32% yoy). EBITDA grew 20% yoy to Rs1.2bn (+11% vs our estimates), while margin expanded by 22bps yoy at 26.5% (+256bps vs our estimate) despite capacity additions (and likely losses in the Panchkula unit). PAT grew 31% yoy to Rs825mn, on account of strong operating print and decline in interest costs owing to reduced debt. Payor mix for 1Q stood at 23%/77% for cash+TPA/government patients, respectively. CONGO mix improved to 51.2% from 46% (+520bps yoy)
We reiterate BUY with revised up Jun-27E TP of Rs375
Management has outlined a well-defined roadmap of bed expansions, as it plans to increase capacity by ~45% over the next 2 years. Management’s FY27 guidance (revenue/EBITDA growth of 24/19%) underpins its focus on profitable growth despite significant capacity additions in existing as well as new clusters. Park’s proven track record of acquiring assets and turning them around, while deepening its presence in existing clusters, lends comfort on growth and margin trajectory, in our view. With an improving payor mix (target of 70/30 scheme & cash), focus on high-acuity procedures and affordable healthcare service proposition, we believe Park’s return profile will remain healthy despite aggressive expansion plans. We expect Park to clock 25% revenue CAGR over FY26-29E, on the back of ARPOB/OBD CAGR of 5/19%, respectively. Net cash balance sheet (FY26: Rs2bn), reducing cash conversion cycle (FY26: 105 days), and lowest capex/bed model should continue to drive a rerating, in our view. Key risks: Delay in collections from government-scheme patients and execution risks in new markets.
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