Motilal Oswal's research report on MAX Healthcare
Max Healthcare Institute (MAXHEALT) is a leading healthcare service provider, with major concentration in North India. The MAXHEALT network comprises 17 hospitals (with 3,270 operating beds) owned/managed by the company. MAXHEALT has a proven track record of improving the profitability of its hospitals and is leading its peers across operational parameters. In fact, it has a substantial land bank in existing locations, which enhances growth prospects over the next three to five years. After reporting 13%/57% revenue/EBITDA CAGR over FY19-22 to INR52b/ INR16b, we expect MAXHEALT to deliver 16%/17% revenue/EBITDA CAGR over FY23-25 to INR77b/INR21.5b and an ROIC of 20% in FY25 (v/s 14% in FY22), due to: a) reducing share of institutional patients, b) higher international patients flow driven by strong brand recall, and c) ongoing cost management measures. The roadmap of more than doubling its operating beds over the next five years remains on track largely due to strong internal accruals. The inorganic initiative would also be another potential driver of earnings growth, given its strong turnaround capability.
Outlook
We value MAXHEALT on an SOTP basis (Hospitals/MaxLab at 23x/15x 12M forward EV/EBITDA and Max@Home at 2x EV/Sales) to arrive at our TP of INR530. The demand factors for the hospital/diagnostic industry in India remain favorable aided by rising income, healthcare needs and higher health insurance penetration. MAXHEALT is well placed to benefit from the opportunities given it is strategically located in metro cities and possesses strong execution capabilities. We initiate coverage on the stock with a BUY rating.
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