Buy Rainbow Children’s Medicare Ltd for the Target Rs.1,650 by Choice Institutional Equities
Strategic expansion steers sustainable growth: The company’s outlook remains robust, supported by its strategic hub-and-spoke network expansion, deeper penetration into new markets and increasing focus on tertiary and quaternary care. We expect these initiatives to reinforce long-term growth trajectory, while continued scaling up of the IVF vertical is likely to further strengthen sustainable revenue growth and profitability.
View and Valuation: We forecast Revenue/EBITDA/APAT to expand at a CAGR of 20.4%/21.7%/27.9% over FY26–FY29E. Valuing the stock at an EV/EBITDA multiple of 22x (maintained) on FY28E, we revise our target price to INR 1,650 and maintain our ‘BUY’ rating on the stock
Strong quarter driven by revenue expansion and profit growth
? Revenue grew 24.3% YoY / 3.2% QoQ to INR 4,599 Mn (vs. CIE estimate: INR 4,499 Mn).
? EBITDA grew 26.1% YoY but declined 1.6% QoQ to INR 1,447 Mn; margin expanded 47 bps YoY and contracted 153 bps QoQ to 31.5% (vs. CIE estimate: 31.7%).
? Adj PAT increased 39.3% YoY / 8.1% QoQ to INR 784 Mn (vs. CIE estimate: INR 707 Mn); PAT margin stood at 17.1%.
High-margin growth momentum sustaining strongly: RAINBOW is entering a powerful expansion phase; over 900 beds are under execution at present across Gurugram, Pune, Coimbatore, Bengaluru and Indore. They are expected to become operational in the next 2.5–3 years. RAINBOW continues to deliver one of the strongest profitability profiles in healthcare in India, despite aggressive expansion investments. The company is targeting ~20% revenue growth in FY27E while maintaining margin, supported by occupancy improvement initiatives, better consultant productivity, higher specialty intensity and stronger asset utilisation. We expect that this combination of high growth and superior margin creates a highly attractive long-term earnings compounding profile.
Specialty expansion strengthening national leadership: RAINBOW is transforming into a diversified high-acuity women-and-children healthcare platform with expanding national leadership and improving earnings quality. The company is witnessing strong growth in fertility, transplants, intensive care, foetal medicine and advanced paediatric specialties, significantly reducing seasonal dependence while improving revenue intensity. IVF revenues reached INR 614 Mn in FY26; the management guided for ~25% annual growth in the next three years, while ARPOB increased +11% YoY driven by richer case mix. We believe RAINBOW’s scalable hub-and-spoke model across 24 hospitals and multiple growth markets positions it strongly for long-term expansion, supported by rising occupancy, stronger pricing power, strategic acquisitions and increasing specialty-led demand across India. Particulars (INR Mn) Q4FY26 Q4FY25 YoY (%) Q3FY26 QoQ (%)
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