PL Stock Report: Max Healthcare Institute (MAXHEALT IN) - Q1FY24 Result Update - Strong performance in seasonally weak quarter - BUY

Max Healthcare Institute (MAXHEALT IN) - Param Desai - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: BUY | CMP: Rs560 | TP: Rs610

Q1FY24 Result Update - Strong performance in seasonally weak quarter

Quick Pointers:

§ Expansion plan largely on track.

§ Company commissioned 44 additional beds in Q1.

Max Healthcare Institute (MAXHEALT) reported EBIDTA of Rs4.3bn (up 6% QoQ) came 4% above our estimates, aided by higher ARPOB of Rs.74.8k in Q1 vs Rs.70.7k in Q4. The company showed phenomenal growth in past two years and we expect this momentum to continue given 1) strong expansion plans (+1500 additional beds by FY25E end), 2) improving payor mix (15% revenue contribution from institutional by FY25E vs 18.4% now) and 3) scale up in labs. Operational efficiency has also been commendable, especially in competitive markets like NCR. Our FY24E/25E EBIDTA broadly remain unchanged and expect 15% EBIDTA CAGR over FY23-25E. We ascribe 27x EV/EBIDTA (25x earlier) based on FY25E. Maintain ‘BUY’ rating with a revised target price of Rs. 610/share (earlier Rs 565/share).

§ EBIDTA beat by 4%; aided by higher ARPOB: MAXHEALT reported EBIDTA of Rs 4.3bn (flat QoQ) vs our estimate of Rs4.1bn. Sequentially, margins declined by ~135 bps to 26.4%. Overall occupancy stood at 74%; vs 77% QoQ, while ARPOB further improved QoQ to Rs.74.8K (up 6% QoQ) due to combination of price hike and improved case mix.

§ Strong revenues; 44 new beds addition in Q1: Consolidated revenues grew by 17% YoY (5% QoQ) to Rs. 16.2bn vs our estimate of Rs15.2bn. PAT improved 29% YoY to Rs. 3.1bn; aided by lower finance cost. International business contribution came in at 8.9% (9.1% in Q4FY23). Institutional share was at 18.4% vs 17.5% in Q4. Max Lab and Max@Home revenue stood at Rs 340mn and Rs 400mn, respectively. In Q1, the company commissioned 44 beds in addition to 92 beds oncology block in Shalimar Bagh in March 2023, where average occupancy was at 77% for Q1.

§ Key con-call takeaways: (1) Capex: Capex guidance for capacity expansion at ~Rs.9bn for FY24E; in addition to Rs1.8bn for maintenance capex. Max incurred Rs. 1.1bn of capex in Q1. (2) Expansion plans- Dwarka (300 beds): Hospital to be commissioned in Q4FY24. Nanavati (329 beds): Excavation and related work almost complete while steel fabrication/wall casting is WIP. Expected to be commissioned by Q4FY25 / Q1FY26. Sector 56 Gurgaon (300 beds): 50% site excavation complete. EPC contract in final execution stage. Max Smart (350 beds): Finally received long-delayed forest approvals. Vikrant Saket (300 beds): Received environment clearance. Reconstituted fire safety plans to be submitted for approval in Sep’23. (3) Payor mix: Institutional patient’s share was at 29.7% vs 30.3% in Q1FY23. Excluding Shalimar, it dropped to 27.4% from 30.1% YoY. Shalimar Bagh – Focus here is to increase occupancy at the cost of optimal payor mix. (4) ARPOB: 5% increase in total billing for PSU contract. Impact of revision in CGHS rate tariff in April’23 on ARPOB was less than 0.6% on blended basis. Revisions in few more segments expected in Q2. (5) Deal with CARE hospitals is sub-judice; Max has filed an appeal in HC. (6) Company remains net cash at Rs9.6bn.

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