In a research report dated September 28, 2023, Motilal Oswal has expressed a bullish outlook on Global Health (MEDANTA) and has recommended a “buy” rating on the stock, setting a target price of Rs 840.
Global Health, also known as MEDANTA, stands as a prominent tertiary care service provider with a well-established presence in North and East India. Committed to delivering specialized healthcare services in densely populated but underserved areas, MEDANTA has strategically expanded its network of hospitals in key locations including Gurugram, Indore, Ranchi, Lucknow, Patna, and an upcoming facility in Noida. Impressively, within just 15 years, the company has scaled its bed capacity to nearly 2,700 beds and has ambitious plans to add over 1,300 additional beds within the next three years.
The success of MEDANTA can be attributed to its team of experienced clinicians and nurses who have effectively catered to a wide range of therapeutic needs, making it a preferred healthcare choice among a vast patient base. The company has exhibited remarkable growth, delivering a 17% revenue CAGR, a 35% EBITDA CAGR, and a 47% PAT CAGR, reaching INR 27 billion in revenue, INR 6.2 billion in EBITDA, and INR 3.3 billion in PAT over the period of FY19-23.
Motilal Oswal foresees this positive momentum continuing, with expectations of a 14% revenue CAGR, a 17% EBITDA CAGR, and a 26% PAT CAGR over FY23-25, which would bring the figures to INR 35 billion in revenue, INR 8.5 billion in EBITDA, and INR 5.2 billion in PAT. This projected growth will be driven by factors including a higher volume of patients at new hospitals, an increase in international patient flow, and an improvement in Average Revenue Per Occupied Bed (ARPOB) supported by a superior payor mix and case mix. The strong demand for healthcare services in cities where MEDANTA operates underscores the need for the company to expand its bed capacity further, a goal it is actively pursuing in Lucknow and Patna.
In light of these compelling factors, Motilal Oswal values MEDANTA at 23x EV/EBITDA, which represents a 10% premium to the sector due to its size and profitability. This valuation methodology leads to their target price of INR 840. Motilal Oswal initiates coverage on MEDANTA with a “BUY” rating, indicating their confidence in the company’s robust business prospects and financial position.
