Medanta volume-led 1QFY27 outperformance supports Noida ramp-up and hospital expansion

Investment View and Recommendation

Motilal Oswal Financial Services Limited (MOFSL) maintains a BUY recommendation on Global Health, which operates the Medanta hospital network, following better-than-expected 1QFY27 operating performance. The broker attributes the outperformance primarily to higher in-patient and out-patient volumes. ARPOB growth was moderate but supported by a favourable case mix.

Revenue and EBITDA exceeded MOFSL estimates by 12% and 13%, respectively. Earnings were marginally below expectations because of higher depreciation, lower other income and a higher tax rate. MOFSL values Global Health at 28 times 12-month forward EV/EBITDA to derive a target price of Rs 1,670, compared with the CMP of Rs 1,406.

1QFY27 Operating Performance

Global Health reported 1QFY27 revenue of Rs 1,330 crore, up 26.2% year on year. In-patient volumes rose 27.7% year on year to 60,200, while out-patient footfalls grew 34.5% to 1.1 million. Occupied bed days increased 21.1%.

ARPOB rose 5.5% to Rs 70,200, aided by a favourable specialty mix and a lower average length of stay of 2.87 days versus 3.03 days a year earlier. ARPP was broadly stable at around Rs 2,02,000. Occupancy was around 63% despite a 22% increase in bed capacity; occupancy excluding Noida was 66%. EBITDA grew 26.3% to Rs 290 crore, with the margin stable at 22%. Adjusted PAT increased 9.2% to Rs 160 crore.

Cluster Performance and Noida Ramp-up

Mature and Developing Clusters

Mature Cluster 1 hospitals, comprising Gurgaon, Indore and Ranchi and accounting for 61% of revenue, delivered revenue growth of 10.1% to Rs 770 crore. EBITDA margin increased by 70 basis points year on year to 24.1%.

Developing Cluster 2 hospitals, comprising Lucknow, Patna and Noida, grew revenue 54.8% to Rs 500 crore. Excluding Noida, Lucknow and Patna generated revenue of Rs 410 crore and EBITDA of Rs 130 crore, implying a 32% EBITDA margin.

Lucknow has expanded from 200 beds at launch in November 2019 to 778 beds. Patna has grown from 100 beds at launch in November 2021 to 600 beds. Patna added 131 beds in FY26 and is expected to add another 49 beds in FY27.

Noida Operating Progress

MOFSL believes Noida is ramping up faster than conventional greenfield hospitals. Noida revenue increased to Rs 85.5 crore from Rs 52.5 crore in 4QFY26, while its operating loss narrowed sharply to Rs 4.9 crore from Rs 23.6 crore. International patient revenue grew 23% year on year and the OPD pharmacy business grew 51%, providing additional growth levers.

Capacity Expansion and Investment Plan

Global Health added 72 beds during 1QFY27, including 51 at Noida and 21 at Lucknow, taking installed capacity to 3,737 beds. The company plans medium-term capacity expansion of around 3,370 beds, or roughly 95% of installed capacity, through greenfield and brownfield projects.

• The 80-bed Indore Cancer Hospital is targeted for commissioning in 2QFY27 or 3QFY27.
• Construction is under way for the 400-bed South Delhi hospital under the DLF partnership.
• The 750-bed Pitampura project is at the planning stage under an operations and maintenance model.
• The Mumbai greenfield hospital of around 750 beds has received additional FSI approvals, although remaining regulatory approvals are under process.
• Guwahati has been scaled up to 650 beds, while Varanasi remains a 400-bed built-to-suit project.

Planned five-year investment is Rs 4,850 crore, including Rs 600 crore of maintenance capex. The investment is expected to be funded through internal accruals and debt.

Estimates, Growth Outlook and Valuation

MOFSL has raised its FY27 and FY28 estimates by 1% and 3%, respectively, reflecting the faster Noida ramp-up and stronger execution at Lucknow and Patna. The broker forecasts FY26-FY28 revenue, EBITDA and PAT CAGRs of 15%, 27% and 33%, respectively.

MOFSL's investment case depends on sustained volume growth, occupancy improvement, a better case mix, successful ramp-up of new hospitals and disciplined execution of the expansion pipeline. The broker's valuation of 28 times 12-month forward EV/EBITDA results in a target price of Rs 1,670.

Key Risks

• Delays in project execution or in obtaining remaining regulatory clearances could weaken the expansion outlook.
• A slower-than-expected ramp-up of new facilities could adversely affect the expected growth drivers.