Top Conviction Ideas : Buy Max Healthcare Institute Ltd for Target Rs. 1,450 - Axis Securities Ltd
* Strong Q1FY26 performance: Max Healthcare reported a strong Q1FY26 performance with revenues at Rs 2,460 Cr, up 27.1% YoY and 5.8% QoQ, marginally ahead of estimates. Growth was supported by higher patient volumes, steady ARPOB, and contributions from newly acquired hospitals. ARPOB stood at Rs 78,000, flat YoY (Existing units +7% Growth YoY), while overall occupancy improved to 76% and Mature Hospitals reported 80%. Occupancy led to a 26% YoY growth in occupied bed days. EBITDA Margins and Profitability: EBITDA margins compressed by 74 bps to 24.1% over the year, despite the addition of new assets. PAT was Rs 345 Cr, reflecting a 17% YoY growth driven by operational efficiencies and cost control.
* Expansion-Focused Growth with Prudent Leverage: The company remains on an aggressive expansion path, with ~1,500 beds (1,000 brownfield + 500 greenfield) slated for commissioning in FY26. Key projects include Nanavati (Mumbai), Smart Saket (Delhi), Lucknow, and Gurgaon Sector 56. Net debt rose to Rs 1,755 Cr due to ongoing capex; however, leverage remains comfortable with net Debt/EBITDA expected to stay <1x, even after planned Rs 400–500 Cr increase by the end of FY26.
* Oncology continues to be the largest segment: On business mix, oncology continues to be the largest segment (~25–26% of revenues) with management guiding sustained growth as radiation oncology becomes operational at Lucknow and Dwarka in Q3FY26, potentially pushing oncology share above 30% over the medium term. International revenues grew 32% YoY to Rs 208 Cr, aided by expansion into new geographies and direct-to-fly marketing offices. Digital revenue also scaled to Rs 744 Cr (29% of sales, +61% YoY), underscoring strong patient acquisition trends.
* Outlook: Max Healthcare’s revenue mix remains well-balanced, with continued growth in institutional and international patient segments. The recent increase in institutional business share is expected to stabilise as higher-value payer segments expand. The short-term margin impact from new hospital ramp-ups should gradually ease as these facilities scale operations. Lucknow and Nagpur are expected to witness further profitability expansion, driven by higher occupancy rates and the introduction of new clinical programs.
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