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Growth to sustain

RAINBOW’s reported strong Q4FY26 EBITDA with growth of 26% YoY; more important organic growth was in double digits which is likely to sustain. RAINBOW has added ~780 beds over the past two years, effectively concluding its current expansion cycle. Overall, we see profitability to improve from FY27 with 18.5% EBITDA CAGR over FY26- 28E vs 13% CAGR over FY24-26 as new capacities ramp up. Company enjoys higher margins, strong FCF generation with net cash B/S, and healthy return ratios because of the asset light hub-and-spoke model, it being the only integrated multi-specialty pediatric hospital chain in India offering comprehensive services, and its full time doctor engagement model. Strategic expansion across its core markets in South India also augurs well forits sustainable growth. Our FY27E / FY28E EBITDA stands increased by 2-3%. Maintain ‘BUY’ rating with revised TP of Rs1,615/share valuing at 25x EV/EBITDA based on pre-IndAS FY28E EBITDA

Strong quarter:

RAINBOW reported EBITDA of Rs1.45bn, up 26% YoY. Despite Q4 being seasonally weak; QoQ EBITDA was flat. Margins grew by 50bps YoY to 31.5. Pre-INDAS EBITDA came in at Rs1.2bn, up by ~30% YoY. OPM stood at 26.1%, grew by ~120bps YoY. Adj PAT increased 39.5% YoY to Rs786mn.

Healthy ARPOB; lower occupancy due to new bed additions:

Revenue grew 24.3% YoY to Rs4.6bn. ARPOB increased 7.6% YoY to Rs62.5k per day aided by better case mix and reduction in ALOS to 2.71 days from 2.77 days in Q4FY25. Average occupancy decreased by 120bps YoY to 45%. In Q4, Rainbow operationalized 48 beds at Electronic City in Bengaluru and commercialized 60 beds in Henur in April 2026. Occupancy of mature units increased by 100bps YoY to 51.8%, while that of new units declined by 40bps YoY to 35.9%. IP volumes were up by 18% YoY; OP volumes improved 19% YoY while deliveries improved by 22% YoY.

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