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As YATHARTH continues to expand its presence across North India, we visited the company to better understand its long-term growth strategy and execution roadmap. During the visit, we met the management of YATHARTH, Mr. Amit Singh - CEO and Mr. Ashutosh Kumar Jha - Group Chief, Strategy, M&A and IR. Additionally, we toured the company's Sector 20, Faridabad and Noida Extension facilities

YATHARTH is targeting ~5,000 operational beds by FY29. The company prefers acquiring operational hospitals, intends to remain focussed on North India, and plans to fund its expansion through a balanced combination of internal cash generation, debt financing and asset-light structures

Valuation: Maintaining our valuation multiple of 20x FY28E EV/EBITDA, we revise our target price to INR 1,100 (from INR 1,050), factoring in the planned expansion of ~5,000 beds by FY29, primarily through acquisitions. We maintain our ‘BUY’ rating.

Expansion Strategy & Growth Plans

* The management reiterated its ambition to significantly scale up the hospital network in the next few years by targeting nearly 5,000 operational beds by FY29, supported through brownfield expansions, acquisitions, and selective greenfield projects with an intends to remain focussed on North India

* The company prefers acquiring operational hospitals instead of developing greenfield assets because existing hospitals provide an established doctor ecosystem, patient base, cash flows, and infrastructure, allowing quicker integration and shorter payback periods

* ~INR 1,500 Cr of capital investment is planned during the expansion period. It will be funded through a balanced combination of internal cash, debt financing and asset-light structures depending on project economics

Operational Performance

* Most mature hospitals are already operating at occupancy levels of around 70%, while newer hospitals are, at present, in the 55–65% range. The management expects occupancy improvements to become one of the largest contributors to revenue and profitability in the next few years

* Despite adding multiple new hospitals which typically take time to mature, the management remains confident of sustaining the strong revenue growth (+30%) achieved last year. Existing hospitals continue to perform well and should offset the temporary drag from newly-commissioned facilities

* The recently-commissioned Faridabad hospital has begun ramping up steadily despite being in the initial phase of operations. Monthly revenues are anticipated to exceed INR 15 Cr by March 2027.

Revenue Drivers & Case Mix Improvement

* The management expects ARPOB to improve through the addition of advanced specialties, such as oncology, radiation therapy, liver transplant and other tertiary care services which command significantly higher realisation

* The company is gradually shifting towards treating more complex medical cases involving cardiology, oncology, neurology, gastroenterology and transplant procedures. This transition is projected to enhance revenue quality, improve margin and strengthen competitive positioning

Hospital-level Highlights

* The management believes the Sector 20, Faridabad hospital possesses significant long-term potential owing to its modern infrastructure, strong patient response, premium positioning, and planned addition of several highend specialties, including oncology, radiation therapy and liver transplant

* Noida Extension remains one of the group's mature assets with healthy occupancy, improving revenues, and continued expansion opportunities. Additional capacity and specialty expansion should support sustained growth over the medium term

* Although Jhansi has relatively lower ARPOB because of a larger government and Ayushman patient mix, the hospital enjoys high occupancy, strong regional brand recognition, and continues to generate attractive returns on invested capital

* The management remains optimistic regarding the Agra acquisition. Integration is progressing according to the plan and, as patient volumes improve, and operational efficiency is implemented, the hospital is forecast to become a meaningful contributor to group earnings

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