Pick of the Week : Buy Healthcare Global Enterprise Ltd for the Target Rs. 702 - Axis Securities Ltd
Investment Rationale
A. An Excellent Performance
• HCG delivered a strong revenue beat with 16.7% YoY growth, supported by 257 new beds, a 15.7% rise in occupied bed days, and improved occupancy of 67% (like-for-like AOR at 76%), while ARPOB remained stable at Rs 44,751.
• EBITDA rose 18.6% YoY to Rs 108 Cr with margins at 17.6% (up 30 bps YoY), though PAT fell to Rs 6 Cr due to higher tax and lower other income.
B. Operational Excellence
• Mature HCG centres showed operational strength with 16.4% revenue growth and 18% EBITDA rise, maintaining steady ARPOB at Rs 43,068.
• Emerging centres drove growth with 23.6% revenue increase and 86% EBITDA surge, alongside an ARPOB of Rs 69,856 (+11.6% YoY), highlighting their strategic impact on profitability and expansion.
C. Beneficiary of Industry Consolidation
• HCG leverages a hub-and-spoke, asset-light model and partnerships to scale faster and expand reach beyond standalone and multi-speciality oncology players.
• With improved leverage (net debt/EBITDA down from 7.4x in FY21 to 3.7x in FY25) and new leadership under KKR, HCG is poised for disciplined growth, margin expansion,
Outlook & Valuation
• HCG is outpacing the 17% CAGR growth of the cancer industry, with plans to add 900 beds over the next 4–5 years and benefiting from margin levers as emerging centres mature above 20%.
• Network expansion through acquisitions and investments, coupled with new investor confidence from KKR, positions HCG for long-term growth.
• HCG Currently trading at 20x/16x EV/EBITDA for FY26E/FY27E
Analyst Insights
BUY with a target price of Rs 702, implying an upside of ~10% from the CMP.
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