HealthCare Global earnings momentum supported by brownfield beds and margin expansion

Investment View and Key Thesis

Prabhudas Lilladher’s August 10, 2026 Q1FY27 result update describes HealthCare Global Enterprises (HCG) as delivering an in-line quarter, with growth momentum intact. The broker retains its BUY rating and Rs 820 target price.

PL considers HCG’s asset-light, partnership-focused model to be capital efficient and scalable. It expects the strategic investment by KKR and the exit from the low-margin fertility business to improve operational and financial efficiency. HCG’s pre-Ind AS margin of about 14 per cent remains below peers, and PL expects growth in predominantly brownfield beds, a better payor mix, focused marketing and margin scaling to narrow this gap.

Q1FY27 Financial Performance

HCG reported Q1FY27 net sales of Rs 6,951 million, up 13.4 per cent year-on-year and 0.3 per cent ahead of PL’s estimate. Reported post-Ind AS EBITDA was Rs 1,269 million, up 17.7 per cent year-on-year but 1.4 per cent below the broker’s estimate. The EBITDA margin increased to 18.3 per cent from 17.6 per cent in Q1FY26.

A Rs 46 million EPCG-related provision affected the quarter. Excluding this one-off cost, EBITDA was Rs 1,270 million, up about 18 per cent year-on-year and in line with estimates. After additionally adjusting for a Rs 70 million loss at the newly commercialised North Bengaluru facility, EBITDA was Rs 1,340 million, up 20 per cent year-on-year, with a 19.4 per cent margin, 120 basis points higher year-on-year. Reported PAT rose 190 per cent year-on-year to Rs 138 million.

Operating Performance and Business Mix

India volumes grew 11 per cent year-on-year in Q1FY27, while inpatient volume increased 6 per cent quarter-on-quarter. ARPP excluding fertility increased 2 per cent year-on-year to about Rs 86,000 per day.

East cluster revenue grew 22 per cent year-on-year, South grew 16 per cent and West grew 9 per cent. Kenya grew 9 per cent, helped by radiation oncology and PET patient inflows. Non-institutional revenue increased 17 per cent year-on-year and represented 69 per cent of revenue, compared with 67 per cent a year earlier, as HCG rationalised lower-margin institutional business.

The fertility business, divested from June 2026, contributed Rs 169 million of revenue and Rs 23 million of EBITDA during the quarter.

Bed Expansion and North Bengaluru Ramp-up

Management added 121 operational beds during Q1FY27 across Bangalore, Ranchi, Borivali, Nashik, Hubli and Kenya. It plans about 815 additional beds by FY30, including 65 beds in H2FY27, around 520 beds in FY28-FY29 and roughly 230 beds in FY30.

About 60 per cent of the pipeline is expected to be brownfield, including 343 beds across all 25 centres in FY28-FY29. Three greenfield projects with 180 beds in Nashik, Whitefield and another Maharashtra location are expected to commission in phases from the end of FY28 through FY29.

North Bengaluru, commissioned in May 2026, generated Rs 67 million revenue in Q1FY27. Registrations and admissions were tracking about 70 per cent ahead of plan. Management targets monthly break-even in FY27 and optimal occupancy of 60-65 per cent.

Margin Expansion and Management Outlook

Management reiterated its expectation of mid-teen revenue growth and an EBITDA margin of about 21-22 per cent over the next two years, with a medium-term aspiration of 24-25 per cent.

The key margin levers are occupancy, payor and case-mix improvement, lower losses at North Bengaluru and automation-led cost optimisation. Sales and marketing spending rose more than 20 per cent year-on-year to about 2.9 per cent of sales, but is expected to normalise to 2.5-2.6 per cent.

The discontinuation of a low-margin chemotherapy drug reduced Q1FY27 revenue by about 1.5 per cent. Management expects this effect to fade as higher-margin business replaces it. Rights issue proceeds included about Rs 1,700 million for debt repayment, and management expects finance costs to decline year-on-year.

Broker Estimates and Valuation

PL reduced its FY27E and FY28E sales estimates by 1.9 per cent and 2.0 per cent, respectively. EBITDA estimates were reduced by 1.5 per cent and 0.1 per cent, while EPS estimates were reduced by 3.0 per cent and 1.2 per cent. The broker retained its target price.

PL forecasts EBITDA CAGR of about 24 per cent over FY26-FY28E, with the EBITDA margin increasing from 18.3 per cent in FY26 to 21.4 per cent in FY28E. At the CMP, PL calculates valuation at 19 times EV/EBITDA adjusted for rentals and minority interest. Its Rs 820 target price is based on 22 times FY28E EV/EBITDA.

Key Execution Areas to Monitor

• The ramp-up and losses of North Bengaluru.
• The pace of bed additions, including the brownfield pipeline.
• Improvement in payor and case mix.
• The impact of pruning low-margin business.