Buy Yatharth Hospitals Ltd For Target Rs. 1,100 by Choice Institutional Equities Ltd
Premium capacity to power revenue and margin:
YATHARTH’s outlook remains strong, supported by its ambition to reach 5,000 beds potentially within 3 years, continued brownfield expansion and selective acquisitions. New hospitals are expected to achieve 15–20% EBITDA margin within 15–18 months. Rising occupancy, 9–10% annual ARPOB growth (we have considered 8%), premium hospitals and stronger specialty mix should drive sustained revenue growth and margin expansion.
Strong revenue beat; EBITDA growth remains healthy
* Revenue grew significantly by 52.3% YoY and 15.0% QoQ at INR 3,927 Mn (vs CIE estimate of INR 3,546 Mn).
* ARPOB grew 7.3% YoY to INR 34,758, with occupancy at 68%.
* EBITDA grew 42.2% YoY and 14.7% QoQ at INR 917 Mn, with margin contracting 167 bps YoY and flat on QoQ at 23.3% (vs CIE estimate of 23.7%)
* PAT grew 12.0% YoY and flat on QoQ to INR 471 Mn (vs CIE of INR 429 Mn).
5,000-bed ambition could materially expand scale and earnings:
The expansion roadmap provides significant visibility for medium-term growth. Gurugram will add 250 beds, while ~450 beds are planned through brownfield expansion across Noida and Noida Extension. Management believes the 5,000- bed target can be achieved within a three-year period. Importantly, future addition is expected to command higher realisation, with new hospitals already approaching INR 50,000 ARPOB vs the group average of INR 34,758. The company is also evaluating acquisitions in capital cities and nearby states, potentially adding at least one new asset in FY27
New hospitals scaling up rapidly, creating a multi-year growth runway:
Q1 FY27 Greater Faridabad, New Delhi and Agra contributed ~27% of revenue, demonstrating strong ramp-up of newer assets. Going forward, the substantial capacity created over the past few quarters should support sustained growth as newer hospitals improve occupancy and profitability. Faridabad Sector 20 already achieved EBITDA breakeven in just 9 months, while Agra reached 20%+ EBITDA margin. Management anticipate newer hospitals to reach 15–20% EBITDA margins within 15–18 months, with newer assets potentially reaching 25%+ EBITDA margin within two years.
Higher ARPOB and specialty mix should drive structural margin expansion:
The improving revenue mix should remain a key earnings driver as YATHARTH adds premium hospitals and expands specialty capabilities. Management expects RPOB to grow 9–10% annually, supported by higher-value specialties, international patients and reduced government-payer dependence in newer facilities. New hospitals are already targeting ARPOBs around ~INR 50,000, materially above the group average, creating scope for blended realisation to rise as their contribution increases.
View and valuation:
We maintain Revenue/EBITDA/PAT to expand at a CAGR of 37.4%/38.6%/38.7% over FY26–FY29E. Maintaining our valuation multiple to 20x EV/EBITDA on FY28E, we maintain our target price to INR 1,100 and maintain our ‘BUY’ rating
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