HealthCare Global expansion and margin scale-up underpin growth despite oncology drug cap

Investment View and Recommendation

Prabhudas Lilladher’s November 9, 2026 Q2FY27 result update retains a BUY rating on HealthCare Global Enterprises (HCG), with a revised target price of Rs 800. The report is titled “Growth to sustain despite trade margin cap”.

The broker believes HCG’s asset-light, partnership-led model is capital efficient and scalable. KKR’s strategic investment and HCG’s exit from the low-margin fertility business are expected to improve operational and financial efficiency. Growth is expected to be driven by predominantly brownfield bed expansion, a better payor mix, focused marketing and margin scale-up.

Q2FY27 Financial Performance

HCG reported Q2FY27 consolidated revenue of Rs 7,318 million, up 13.1 per cent YoY and 1.8 per cent above Prabhudas Lilladher’s estimate of Rs 7,192 million. Reported post-Ind AS EBITDA was Rs 1,364 million, up about 11 per cent YoY, with an operating margin of 18.6 per cent. EBITDA was 1.7 per cent below the broker’s estimate of Rs 1,387 million.

After adjusting for new-unit losses, ESOP cost and the Milann divestment, EBITDA rose 17 per cent YoY to Rs 1,420 million, in line with Prabhudas Lilladher’s estimate. The North Bangalore unit reported a loss of Rs 61 million, compared with a loss of Rs 70 million QoQ. Employee cost increased around 22 per cent YoY to about Rs 1,140 million, consultancy charges rose 18 per cent and other expenses increased about 9 per cent.

Reported PAT declined 71 per cent YoY to Rs 48 million because of a one-time Export Promotion Capital Goods Scheme provision of about Rs 116 million in Q2FY27. Adjusted for this provision, PAT improved about 1 per cent YoY.

Operating Performance and Expansion

Operating indicators remained healthy. Average revenue per patient per day rose 7 per cent YoY to about Rs 88,800, while India patient volumes increased 9 per cent YoY. The non-institutional mix expanded by 325 basis points YoY to 69 per cent.

• Revenue growth was 23 per cent YoY in the East cluster, 18 per cent in the South and 10 per cent in the West.
• Kenya revenue grew 54 per cent YoY to Rs 302 million, supported by stronger patient inflows in radiation and medical oncology.
• HCG operationalised 25 beds in Q2FY27 across Kenya, Kolkata and Nagpur, taking H1FY27 additions to 146 beds.

Growth Outlook and Key Considerations

Management reiterated that EBITDA growth should exceed historical growth in coming years. HCG has outlined an approximately 792-bed expansion programme over 2HFY27 to FY30.

Management also guided for a temporary impact from the price cap on 137 oncology drugs. Prabhudas Lilladher notes that HCG’s pre-Ind AS margin of about 14 per cent remains below peers, leaving scope for margin improvement. However, the price cap and the impact of new units remain relevant near-term considerations.

Estimates and Valuation

The broker reduced its FY28E and FY29E EBITDA estimates by 2 to 4 per cent. Its current estimates are as follows:

Prabhudas Lilladher expects approximately 22 per cent EBITDA CAGR over FY26 to FY29E. At the CMP, the broker calculates that HCG trades at 15 times September 2028 EV/EBITDA adjusted for rentals and minority interest. The Rs 800 target price values HCG at 20 times September 2028E EV/EBITDA.

The target price was reduced from Rs 820 alongside the estimate revisions, while the BUY recommendation was retained.