Reduce Global Health Ltd for the Target Rs.1,235 By Emkay Global Financial Services Ltd
Margin trajectory to remain subdued in FY26
Global Health (Medanta)’s Q2FY26 operating print missed street’s/our estimates, mainly due to higher than anticipated Noida losses (~Rs197mn). ExNoida, the developing portfolio continued to outperform, with revenue/EBITDA up 28%/34% YoY, while the mature portfolio was a drag. Though fixed costs are largely incurred for Noida unit, impending insurance empanelments as well as hiring for a few specialties and operations teams are likely to lead to a 120- 130bps drag on overall EBITDA margin in FY26. We expect lumpy bed adds (~2,300 in FY29)—owing to the greenfield nature of the expansion—to pose execution-related risks, thereby inducing volatility in both, growth and profitability. Factoring in the Q2 miss, we cut FY26E/27E EBITDA by 8%/4%, respectively, and trim Sep-26E TP by 5% to Rs1,235 (from Rs1,300), based on 26x Sep-27E pre-IndAS EV/EBITDA (in line with the sector’s); retain REDUCE.
Noida commissioning dents margin performance
Medanta posted in-line revenue at Rs11.0bn (up 15% YoY). EBITDA was marginally down (-1% YoY), while EBITDA margin dropped by 349bps YoY to 21% on due to higher employee/doctor costs (+28%/27% YoY). Mature/developing portfolio EBITDA was flat/grew 11%. Initial ramp-up costs for Noida unit resulted in EBITDA loss of Rs197mn, dragging the developing portfolio margin. Reported PAT was Rs1.6bn (+21% YoY), due to a Rs160mn adjustment toward reversal of stamp duty on account of the merger. Adj PAT stood at Rs1.4bn (+4% YoY), with increase in other income (+8% YoY) and decline in tax expense (-18% YoY), partially offset by increase in interest cost (+7% YoY). Overall ARPOB was up ~6% YoY, while ALOS improved 4.4% YoY to 3.06 days. Group OBD increased ~8%; overall IPD/OPD volumes were up ~13%/15% YoY. International patient revenue grew to Rs762mn (up ~49% YoY), driven by volume growth.
Earnings call highlights
1) Update on projects: Mumbai hospital capacity plan increased from 500 to 750 beds, with approval for additional FSI, added capex of Rs3.3bn; Guwahati’s >400 bed hospital: land acquired (3.5acres for Rs600mn), Bhoomi Poojan completed in Oct-25. 2) In Lucknow, IP volume rose 30% with 67% occupancy and ARPOB above Rs65,000, driven by new pediatric, oncology, cardiology services. Patna unit added 57 beds in H1FY26, maintaining ARPOB of Rs48,000–50,000; Ranchi saw 15% YoY volume growth with 110 new beds and upcoming oncology services. 3) All hospitals (ex-Noida, new Ranchi facility) empaneled with all insurance companies; expects Noida hospital to be empaneled before Q4FY26. 4) The mgmt said Medanta has not taken any price hike in Patna since its inception, while seeing only minimal increase in Lucknow. 5) Gurgaon OPD pharmacy operations have been transitioned to GHL Pharma & Diagnostic (wholly-owned subsidiary), marking completion of the transfer process. With this, all retail laboratories and OPD pharmacies now consolidated under GHL Pharma & Diagnostic; hospital IP pharmacies and laboratories would continue operating in their respective hospitals. 6) Overall debtor days: ~80-90; payments from CGHS and ECHS take ~7-9 months.
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