Healthcare Global Enterprises Ltd Stock Research Report

PURE CANCER SPECIALITY……

HCG is one of India’s leading cancer care providers, operating 21 comprehensive centers dedicated to advanced treatment. The organization boasts a team of over 275 oncologists across various specialties, offering patient-centric and value-based care. Known for utilizing cutting-edge technology, HCG focuses on innovation and research to ensure the best possible outcomes. With three decades of experience, the company has successfully treated millions of cancer patients. HCG’s commitment to clinical excellence and continuous improvement has made it a trusted name in cancer care.

Key Rationale

◼ Solid Performance:

In Q2FY25HCG reported a strong set of results, in line with our expectations. Revenue grew by 13.7%, driven by a 7.5% YoY ARPOB increase and a 6.4% growth in the number of occupied days. The ARPOB of Rs 45,188 rose by 7.5% YoY and 1.9% QoQ, showing healthy growth, while occupancy at 65.6% remained nearly flat YoY/QoQ.EBITDA margins improved to 18.5%, up by 109/118bps YoY/QoQ, meeting our expectation of 18%. Reported PAT stood at Rs 21 Cr, showing a growth of 91% YoY and 51% QoQ.

◼ Operational Excellence:

Existing centers reported revenue of Rs 485 Cr, with EBITDA margins around 23.3% for the last quarter. Management has guided that, excluding MG, Consol. EBITDA margins could reach 20% in Q4FY25. Emerging centers currently comprise 163 beds, down from 532 beds six months ago. Revenue from emerging centers was Rs 53 Cr, compared to Rs 121 Cr YoY, reflecting that most centers have now matured and are contributing to profit at the operating level. These 163 beds in emerging centers are expected to reach EBITDA breakeven by year-end.

Healthcare Global Enterprises Ltd Stock Research Report

◼ Capacity Expansion:

HCG recently acquired MG Hospital in Vizag, a comprehensive care provider with 196 operational beds and healthy margins of 35%. This deal, valued at 9.8x EV/EBITDA, appears favourable for shareholders. Additionally, HCG inaugurated a 200-bed comprehensive cancer care center in Ahmedabad last quarter, and the company is adding 125 beds in North Bangalore through a brownfield capacity expansion

◼ Outlook:

 The cancer industry is growing at a CAGR of 17% and HCG is outpacing this industry growth. The company plans to add 900 incremental beds over the next 4-5 years to capture upcoming opportunities.

◼ Valuation:

We anticipate a 1000bps improvement in RoIC for HCG over the next three years, driven by increased operating profitability. Currently, the stock trades at 13x and 11x EV/EBITDA for FY26 and FY27, respectively.

◼ Key Risks: a) Slowdown in commissioning projects. b) Govt. Regulations changes. c) High Attrition Of clinicals.

Key Financials