Max Healthcare Shares Surge Over 1% on Strategic Acquisition, Analysts Bullish on Growth Prospects

Max Healthcare Institute shares rose over 1% in early trading on Monday following the announcement of a share purchase agreement for the acquisition of Sahara Hospital in Lucknow.

This move is significant as it puts Max Healthcare in direct competition with established players such as Apollo Hospitals Enterprise and Medanta (Global healthcare), both of which have seen substantial growth in Lucknow. Analysts view Max Healthcare’s entry into the market positively, anticipating potential growth.

Analysts from Motilal Oswal Financial Services Ltd. commented, “Considering the performance of Medanta and Apollo Hospital in Lucknow, we assume Max to achieve Ebitda margin of 30% over the next 12-18 months.” Ebitda refers to Earnings before Interest, Tax, Depreciation, and Amortization.

The incremental investment of ₹150-200 crore could increase the hospital’s capacity from 250 to 550 beds, providing further benefits for Max Healthcare. The hospital, located on a 27-acre land parcel in Gomti Nagar, Lucknow, has a built-up area of ~82,673 sqm spread across 17 floors, with a revenue run rate of ₹200 crore per annum.

Max Healthcare stated, “The hospital has the potential to quickly ramp up beds in the existing building and expand medical programs like Oncology, Transplants, Robotics, etc.” The forward earnings outlook for Max Healthcare appears positive, with strong occupancy rates, a rising number of inpatients, increased insurance penetration, a rebound in medical tourism, and ongoing expansions to meet rising demand.

Motilal Oswal Financial Services analysts have raised their earnings estimates by 3% for FY25 in light of the Lucknow acquisition, valuing Max Healthcare on a Sum-of-the-parts basis to set a target price of ₹780. The acquisition is expected to strengthen Max Healthcare’s presence in Lucknow and surrounding districts, providing ample land for future expansion at a single location. Analysts find the acquisition attractive due to the potential for growth and profitability improvements. Max Healthcare’s share price has already increased by more than 55% in the past year.