Max Healthcare Institute Ltd Stock Research Report

Max Healthcare: Adding Beds, Expanding Growth, and Optimizing Margins…

We initiate coverage of MAX Healthcare Ltd. with a BUY recommendation and a target price of Rs 1,315/share, implying a potential upside of 18% from the CMP. Max Healthcare is a market leader in the Delhi-NCR and Mumbai regions, with over 2,900 beds and dominant leadership in oncology. The company plans to add 3,000 beds over the next three years, primarily through brownfield expansions. Strong operational performance has resulted in significant EBITDA growth and improved margins, which currently stand at 26.5%. With robust cash flows and strategic expansions, Max Healthcare is well positioned for continued profitability and growth. We expect Revenue/EBITDA growth of 30%/31% in FY25E and by 23%/24% in FY26E.

Investment Thesis

Leadership Dominance:

MAX Healthcare is a well-known brand with a dominant presence in the Delhi-NCR and Mumbai regions boasting over 2,900 beds — the highest among its peers — making it a market leader.Its large metro presence gives MAX the advantage of having the highest ARPOB of Rs 76,000, along with the highest occupancy rate of 75% across the industry.

MAX has a diversified portfolio, with the oncology segment dominating, valued at Rs 1,400 Cr and holding nearly 20% of the market share, demonstrating its leadership with 13,150 complex oncology procedures.Strategically positioned in the Delhi-NCR region, which has the highest ARPOB among metro cities in India, the company also benefits from a significant land bank at its existing locations, allowing for controlled expansion in the future.

MAX’s strength also lies in its clinical talent under the guidance of Mr. Abhay Soi. Each facility operates independently, which has contributed to a remarkably low attrition rate of less than 1% over the last five years.

Expansions of Network:

The company plans to add 3,000 beds to its network over the next three years, which is 70% of its existing capacity. Moreover, 80% of these beds will come through brownfield expansions. MAX also focuses on value investing and has recently acquired a hospital chain from Jaypee Healthcare, which includes 800 capacity beds, to strategically increase footfalls in the Noida region. A newly added facility, a 300-bed hospital in Dwarka, currently has an occupancy rate of around 45% and is expected to break even within the next 12 months.

Healthy Cashflows; Self-sufficient to Fund further Capex:

We expect that this expansion will result in an outflow of Rs 5,000 Cr over the next three years for building the new 3,000+ beds. As of now, the company has already invested Rs 1,700 Cr, and in the future, the required funds will be sourced from internal accruals. The expected CFO for FY26E/FY27E is Rs 2,365 Cr and Rs 2,689 Cr, respectively. Furthermore, we believe the company has a healthy cash flow, which would be sufficient to meet the Capex.

Max Healthcare Institute Ltd Stock Research Report – Margins:

Max has shown impressive growth in both EBITDA and its EBITDA margin over recent years, reflecting strong operational efficiency. EBITDA has grown significantly from Rs 332 Cr in FY21 to Rs 1,806 Cr in FY24, demonstrating consistent expansion in core operational performance. Alongside this growth, the EBITDA margin has also improved, rising from 9.2% to 26.5% over the same period. Looking ahead, we expect these margins to remain stable in the range of 27-28%, as new incremental beds from brownfield expansions will take some time to become operationally profitable. Furthermore, we anticipate an ROCE of 20.5% in FY27E, which would represent an increase of 500bps over the period.

Valuation & Recommendation:

Max Healthcare presents a compelling investment case, driven by impressive revenue growth projections and strong financial performance. Expected improvements in occupancy rates, rising ARPOB, and the company’s strategic expansion across diverse micro-markets are poised to significantly enhance profitability. Its strong ability to generate CFO, improve ROCE to ~20.5% and maintain a high EBITDA margin further underscores its financial strength. We initiate coverage on the company with a BUY rating and a target price of Rs 1,315/share, based on a multiple of 35x EV/EBITDA for FY27E. The target price implies an upside potential of 18% from the CMP.