Healthcare Global Enterprises targets expansion-led oncology growth and higher profitability

Investment View and Key Rationale

ICICI Direct Research retains its BUY view on Healthcare Global Enterprises (HCG), supported by its position as a single-specialty oncology healthcare operator, planned capacity expansion, improving profitability potential and the opportunity to capture rising cancer-care demand. The broker views the acquisition of a 54 per cent stake in HCG by KKR positively, citing KKR’s healthcare investment pedigree and longer investment horizon.

HCG operates 25 comprehensive cancer centres, two Centres of Excellence, six day-care centres and four multi-specialty hospitals. Its Q1FY27 specialty mix comprised medical oncology at 39 per cent, surgical oncology at 21 per cent, OPD oncology services at 15 per cent, radiation oncology at 14 per cent and non-oncology at 11 per cent.

Q1FY27 Financial and Operating Performance

Q1FY27 revenue rose 13 per cent year-on-year to Rs 693 crore, driven by 11 per cent volume growth and 2 per cent ARPP growth. EBITDA increased 13 per cent year-on-year to approximately Rs 122 crore, while the EBITDA margin was flat at 17.6 per cent. The quarter was described as decent despite softness in the West Cluster.

Cluster performance was mixed. The West Cluster, which represented 43 per cent of hospital revenue, grew revenue by 9 per cent year-on-year, led by 10 per cent volume growth while ARPP fell 1 per cent. The South Cluster, at 40 per cent of hospital revenue, posted 16 per cent revenue growth, with 7 per cent volume growth and 8 per cent ARPP growth. The East Cluster, contributing 11 per cent of hospital revenue, delivered 22 per cent revenue growth on 25 per cent volume growth, although ARPP declined 3 per cent.

Non-institutional revenue grew 17 per cent year-on-year and increased its contribution from 67 per cent to 69 per cent, improving the payer mix. Excluding North Bengaluru losses and one-off costs, adjusted EBITDA grew 20 per cent year-on-year and the margin expanded to 19.4 per cent from 18.2 per cent. Sixteen of 25 mature centres recorded their highest-ever quarterly revenue.

Capacity Expansion and New Hospital Ramp-up

The new 132-bed North Bengaluru cancer hospital contributed Rs 6.7 crore in its first operating quarter, registered over 550 new patients and recorded more than 300 admissions. Management expects Q1FY27 to be the peak EBITDA-loss quarter for the facility, with monthly break-even expected within FY27 and optimum occupancy of 60-65 per cent over time.

HCG added 61 operational beds in the South Cluster, 27 in the West Cluster and 26 in the East Cluster during Q1FY27. Existing hospitals can operate at 75-80 per cent utilisation, implying further growth headroom before substantial new capacity is needed.

As of March 31, 2026, HCG had 2,734 beds and 38 LINAC machines. It plans to add more than 935 beds and four LINAC machines by FY30, involving around Rs 550 crore of capital expenditure. Nearly 60 per cent of the expansion is expected through brownfield projects, which ICICI Direct expects to ramp up faster.

HCG has also added robotic surgical systems at Nashik and the Bengaluru Centre of Excellence. Following the exit from the barely profitable Milann fertility business, which had FY26 sales of Rs 61 crore, management is focusing on core oncology, CAR-T therapy, bone marrow transplants, robotic surgery, precision oncology and precision diagnostics.

Profitability Outlook and Estimates

Management guided for mid-teen revenue growth and progressive margin improvement through payer-mix gains, higher clinical complexity, operating leverage and lower losses from new hospitals. Its EBITDA-margin aspiration is around 21 per cent over the next two years and around 25 per cent over four to five years.

Valuation and Key Risks

ICICI Direct’s target price of Rs 785 is based on 19 times FY28E EBITDA of Rs 675 crore.

Key risks identified by the broker are:

• Delayed payback from announced capital expenditure.
• Competition from super-specialty hospitals in cancer treatment.
• Attrition of trained staff and doctors.