Dr. Agarwal’s Health Care gains from strong SSSG, premiumisation and rapid facility expansion

Investment View and 1QFY27 Performance

Motilal Oswal Financial Services Limited reiterated its Buy recommendation on Dr. Agarwal’s Health Care following a better-than-expected 1QFY27 performance. The broker sees a healthy start to FY27, supported by strong same-store sales growth, broad-based growth across mature and emerging centres, premiumisation of procedures and rapid network expansion.

At the report CMP of Rs 494, the target price of Rs 620 implied 26 per cent upside.

PAT increased from Rs 30 crore in 1QFY26, aided further by a lower tax rate.

Business Performance and Growth Drivers

The surgery business remained the principal growth engine. Revenue rose 26.7 per cent year on year to Rs 400 crore, representing 66 per cent of total revenue. Diagnosis, consultations and other revenue grew 14.5 per cent to Rs 74 crore, while opticals, contact lenses and accessories increased 32.8 per cent to Rs 84 crore. Eye-care-related pharma products grew 27.5 per cent to Rs 52 crore.

Surgeries performed rose 15.5 per cent year on year to 91,082, while average revenue per surgery increased 9.8 per cent to Rs 44,426, indicating growth from both volumes and realisations.

Same-store sales growth was 16.3 per cent for facilities established or acquired through FY23. Facilities opened in FY24 and FY25 delivered revenue growth of 19.6 per cent and 38.6 per cent year on year, respectively. The North region recorded 37 per cent year-on-year surgery growth, compared with about 13 per cent growth in South, West and East India.

Dr. Agarwal’s Health Care added 18 facilities during 1QFY27, all organically, taking the network to 304 facilities.

Premiumisation and Payor Mix

Management said the 16 per cent same-store sales growth was evenly driven by volume and value. Higher patient footfalls and outpatient department volumes, which increased 6 per cent, along with a 2 per cent improvement in surgical conversion, supported volume growth. Premiumisation drove realisations, with high-end procedures forming 29 per cent of cataract surgeries in the quarter.

Management expects healthy near-term volume growth and further value growth through premiumisation, newer technologies including SINTA cataract, and increased insurance penetration. The payor mix was 68 per cent cash and 28 per cent insurance, with the balance coming from government schemes. Management expects gross margins to expand over time with a richer procedure mix and higher adoption of advanced technologies.

Network Expansion and Management Outlook

Dr. Agarwal’s Health Care is on track to add 42 more facilities in FY27. Around 30 letters of intent have been signed, with doctor recruitment or agreements underway. Planned additions comprise 24 facilities in South, 15 in West, 16 in North and five in East.

Management expects the merger with Dr. Agarwal Eye Hospital to complete by mid-November. Leadership changes supported considerable revenue growth in Gujarat, while facilities in Punjab and Haryana recovered strongly after being affected by floods in the prior year.

Earnings Forecasts and Valuation

Motilal Oswal raised its FY27 and FY28 estimates by 5 per cent and 2 per cent, respectively, reflecting a higher mix of high-end surgeries and faster facility additions. The broker forecasts revenue to grow at a 23 per cent CAGR over FY26-FY28, EBITDA margin to expand by 50 basis points, and PAT to compound at 41 per cent.

The Rs 620 target price values the surgery business at 25 times EV/EBITDA, opticals at 15 times and pharmacy at 10 times. The valuation is adjusted for the stakes in Dr. Agarwal Eye Hospital and Thind Hospital.