Global Health Ltd Stock Research Report

Elevating the Opportunity in Underserved Micro Markets

Est. Vs. Actual for Q2FY25: Revenue: BEAT; EBITDA Margin: BEAT; PAT: BEAT

Changes in Estimates post Q2FY25.

FY25E/FY26E: Revenue: 0.9%/6.9%; EBITDA Abs: -2.3%/-6.9%; PAT:-10.2%/-16.9%

Recommendation Rationale

• Medanta reported revenue of Rs 957 Cr, exceeding our expectations, driven by a flat ARPOB and a slight increase in occupancies. ARPOB increased to Rs 62,140, up 1.9% YoY, while occupancies improved by 623 bps YoY.
• EBITDA margins were 24.5%, down 140 bps YoY but showed a sequential improvement of 231 bps. Reported PAT stood at Rs 131 Cr, marking a 4.4% YoY increase due to improved operating profitability and lower depreciation costs.

Sector Outlook: Positive

Company Outlook & Guidance: The shift in the IPD revenue mix from Cash to TPA appears to be temporary, and it is anticipated that the mix will return to its previous state soon. Medanta has acquired land in Mumbai for the construction of a 500+ bed hospital, with the total cost of acquisition and construction amounting to Rs 1,200 Cr. The new hospital is expected to generate revenue in the range of Rs 700 to Rs 800 Cr and achieve a potential profit of around Rs 200 Cr.

Current Valuation: EV/EBITDA 25x for FY27E EBITDA (Earlier Valuation: EV/EBITDA 26)

Current TP: Rs 1,200/share (Earlier TP: Rs 1,245/share)

Recommendation: BUY

Global Health Ltd Stock Research Report

Financial Performance:

Medanta reported revenue of Rs 957 Cr, exceeding our expectations, driven by a flat ARPOB and a slight increase in occupancies. ARPOB increased to Rs 62,140, up 1.9% YoY, while occupancies improved by 623 bps YoY. The higher occupancy rates were primarily due to an 8% YoY growth in IPD volumes. The company’s topline grew by 13.3% YoY, with realisation rising by 1.9%. EBITDA margins were 24.5%, down 140 bps YoY but showed a sequential improvement of 231 bps. Reported PAT stood at Rs 131 Cr, marking a 4.4% YoY increase due to improved operating leverage.

In developing hospitals, the topline shows gradual recovery signs with a 4.2% YoY growth. Occupancies improved by 800/400 bps QoQ/YoY, with overall occupied bed days increasing by 14.5%, while ARPOB declined by 5.9% due to a change in the payer mix. Medanta added 66 beds at the Patna unit and 52 beds at the Lucknow unit. Matured hospitals showed 13.5% topline growth, with occupancies up by 200/400 bps QoQ/YoY and ARPOB up by 6.2% YoY, driven by revised tariffs at the Gurugram hospital and an improved payer mix. EBITDA margins remained relatively stable for the matured units.

Medanta has acquired land in Mumbai for the construction of a 500+ bed hospital, with Rs 370 Cr capex incurred in H1FY25, including Rs 131 Cr related to land acquisition. Additionally, Medanta has entered into an MoU for the O&M of a 750-bed super speciality hospital in Pitampura, Delhi, in collaboration with the Dr. Narayan Dutt Shirmali Foundation International Charitable Trust Society.

Key Financials (Consolidated)

Outlook

The shift in the IPD revenue mix from Cash to TPA appears to be temporary, and we anticipate a restoration to previous levels soon. Despite a softened performance in Lucknow for H1FY25, the facility has strengthened its clinical team with the hiring of 52 specialized clinicians. As the second-largest hospital chain in India after Max Health, Medanta is well-positioned to benefit from increasing consumer spending in the healthcare sector.

Medanta has acquired land in Mumbai for a new 500+ bed hospital, with a total investment of Rs 1,200 Cr for acquisition and construction. The new hospital is expected to generate revenue in the range of Rs 700 to Rs 800 Cr and a potential profit of around Rs 200 Cr.

Valuation & Recommendation

Given the anticipated restoration of business from temporary hurdles, improvements in ARPOB, and the addition of incremental bed capacity, along with the Noida Hospital now expected to be operational from FY26E instead of H2FY25, we maintain a BUY rating on Medanta. The target price is set at Rs 1,200/share, representing an upside potential of 12% from the CMP. This valuation is based on a multiple of 25x EV/EBITDA for FY26E.