Hold Narayana Hrudayalaya Ltd For the Target Rs. 1,460 by Choice Broking Ltd
NARH Sees YoY Growth Driven by ARPP Increase, But Misses Estimates
* Revenue grew 13.5% YoY but declined 2.4% 13.7 Bn (vs. CEBPL estimates of INR 14.4 Bn).
* EBITDA stood at INR 3.1 Bn, up 10.1% YoY and flat QoQ, with margins at 22.5%, contracting 71bps YoY and expanding 43bps QoQ (vs. CEBPL estimates of 23.0%).
* PAT increased 2.6% YoY but declined 3.0% QoQ to INR 1.9 Bn (vs. CEBPL estimates of INR 2.2 Bn).
* Average Revenue Per Patient (ARPP) for Indian facilities stood at INR 133.5K for In-Patients (IP) (+8.5% YoY) and INR 4.4K for Out-Patients (OP) (+4.8% YoY).
* Cayman facility’s ARPP came in at USD 34.9K for IP (+13.7% YoY) and USD 1.3K for OP (+8.3% YoY).
New Cayman Bay Facility Ramp-Up Expected from Q4FY25, Revenue to Boost with IPD Expansion
Cayman posted 14.4% YoY and 20.4% QoQ sales growth in INR terms, now contributing ~20% of total revenue. NARH began outpatient services at the new Cayman Bay facility during the quarter and launched IPD and emergency room services in January 2025. Obstetrics and Neonatal care services started in February. Management anticipates full commissioning of all services by March 2025. We expect the hospital to ramp up fully, boosting both revenue and EBITDA from Q4FY25 onwards
India Region Bed Expansion Paused Until FY28, International Patient Revenues Impacted by Geopolitical Issues
India revenues grew 13.3% YoY but declined 6.9% QoQ due to seasonality. International patient volumes saw a significant drop, particularly from Bangladesh, due to ongoing geo-political issues. The company plans to expand its bed capacity to over 8,000 beds by FY30 (currently 6,313), with most of these additions expected by FY28/29, primarily in the Bangalore region. In the near term, with no major bed expansions, we expect gradual growth in the India region, driven primarily by ARPP expansion and better case mix.
View and Valuation: We value NARH at an EV/EBITDA of 18x on an FY27 basis, with a target price of INR 1,460 and have downgraded our rating to ‘HOLD’. With no bed expansion in the India region (which accounts for 80% of revenue) until FY28, we expect a slowdown in revenue growth. However, the ramp-up of the new Cayman Bay facility is expected to reduce high operational costs related to scaling the facility, thereby improving NARH's overall EBITDA margin.
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