Max Healthcare growth outlook supported by new beds, CGHS gains and oncology recovery

Investment View and Valuation

In its August 16, 2026 Q1FY27 result update, Prabhudas Lilladher maintained its BUY rating on Max Healthcare Institute with a target price of Rs 1,150 per share, compared with the CMP of Rs 1,009. The broker believes the company’s growth trajectory is improving sequentially, supported by new bed additions, revised CGHS pricing and further ramp-up at the Noida and Dwarka units.

Prabhudas Lilladher highlighted Max Healthcare’s operational efficiency, particularly in the competitive NCR market. It expects EBITDA to grow at a 19 per cent CAGR over FY26-FY28E and values the company at 30x FY28E EV/EBITDA, compared with about 27x at the CMP.

Q1FY27 Financial Performance

Max Healthcare reported a broadly in-line Q1FY27 performance. Consolidated revenue increased 15.2 per cent year on year to Rs 28,350 million, which was 4.3 per cent above the broker’s estimate of Rs 27,189 million. EBITDA rose 14.8 per cent year on year to Rs 7,050 million, 1.3 per cent above estimate.

Year-on-year growth was affected by the discontinuation of selected chemotherapy drugs for institutional patients, which began affecting the base from Q3FY26. The broker expects this oncology-related drag to normalise from Q3FY27 and fully recover by Q4FY27.

Operating Indicators and Business Mix

Operating indicators remained healthy. Consolidated occupancy was 75 per cent, down 100 basis points year on year but flat sequentially, reflecting new bed additions. ARPOB rose about 5 per cent year on year to Rs 81,900 per day, while EBITDA per occupied bed was Rs 7.1 million compared with Rs 7.34 million in Q4FY26.

• Oncology’s share of IPD declined to 22 per cent from 26 per cent in Q1FY26.
• Institutional revenue share declined 90 basis points year on year to 20.9 per cent.
• Insurance mix improved 200 basis points to 37.8 per cent.
• Max Lab generated Rs 580 million of revenue, while Max@Home generated Rs 780 million.

Net debt rose Rs 4,800 million sequentially to Rs 23,900 million following the acquisition of a 58.28 per cent controlling stake in Kalinga Hospital in Bhubaneswar and the consolidation of the Yerawada unit in Pune.

Bed Expansion and Capacity Ramp-up

Management said 50 per cent of the 400-bed brownfield tower at Max Smart is operating at about 80 per cent occupancy, with the remaining beds expected to become operational in Q2FY27. Remaining beds at Nanavati Max are also expected to become operational during the quarter, while work on its 271-bed Phase 2 has begun.

The company is progressing multiple projects across Lucknow, Gurgaon Sector 56, Bhubaneswar, Nagpur, Zirakpur/Mohali, Pitampura, Patparganj, Dwarka, Pune, Thane and Shaheed Path. New beds at Max Smart and Nanavati are expected to contribute meaningfully to EBITDA over the next two to three quarters.

Kalinga Hospital and CGHS Opportunity

Kalinga contributed Rs 190 million of revenue and Rs 20 million of EBITDA after its acquisition in Q1FY27. The hospital had about 50 per cent occupancy and an ARPOB of Rs 35,000. Management is targeting a 50-80 per cent increase in both occupancy and ARPOB over the next 12 months through renovation, technology upgrades and clinical-programme ramp-up. It also plans to add another 200-250 beds.

Revised CGHS super-specialty rates, effective June, have an estimated annualised EBITDA potential of about Rs 1,400 million. However, CGHS and PSU business remains structurally loss-making, and institutional mix is expected to decline. Management also expects around 6 per cent automatic price increases on key insurance renewals in September-October 2026.

Earnings Estimates and Cash Flow Outlook

Prabhudas Lilladher retained its FY27E and FY28E EBITDA estimates largely unchanged. It increased sales estimates but reduced EPS estimates for both periods.

Management expects free-cash-flow conversion to improve as the new CGHS portal stabilises. It is comfortable with leverage of up to 2.5x net debt to EBITDA for mergers and acquisitions.

Key Watch Items and Risks

• Normalisation of oncology performance and recovery of the affected base.
• Execution and approval timelines for expansion projects.
• Working-capital pressure, with days sales outstanding rising to 95 days.
• Leverage associated with acquisitions and capital expenditure.
• The structurally loss-making nature of CGHS and PSU business, despite the revised CGHS pricing opportunity.