Chola Securities has issued a BUY recommendation for Narayana Hrudayalaya Limited (NHL), a leading healthcare provider, known for its expertise in cardiac, oncology, and nephrology treatments. With an aggressive growth outlook supported by both organic expansion and strategic acquisitions, NHL is poised to deliver strong returns over the next three years. The research house sets a target price of ₹2,145, indicating a +70% upside from its current market price of ₹1,254.45. Key growth drivers include its robust cardiac program, expansion into new healthcare services, and increased capacity in both India and international markets.

Key Financial Metrics

Current Price: ₹1,254.45
Price Target: ₹2,145
Investment Horizon: 3 years
Market Cap: ₹25,932 crore
EPS FY27E: ₹68.78
P/E Ratio FY27E: 18.2x
ROE FY24: 31.4%
PAT CAGR (FY24-27E): 21.19%

Investment Rationale

Cardiac Program Leadership:
Narayana Hrudayalaya is a market leader in cardiac care, performing around 15% of all heart surgeries in India. Its comprehensive cardiac services range from advanced coronary artery bypass grafting to robotic surgeries, positioning NHL at the forefront of medical innovation. The pediatric cardiac program is the largest in the country, with over 13,000 surgeries annually.

Cost Leadership and Operating Efficiency:
NHL’s ability to provide high-quality healthcare at a significantly lower cost compared to peers allows the company to maintain its competitive edge. It boasts the highest ROE in the industry at 31.4%, while trading at a PER of 32x, far below the industry average of 80x. Moreover, its efficient bed utilization and reduced payback period per bed enhances return ratios and profitability.

Growth Drivers

Expansion of Oncology and Other Specialties:
Oncology, which contributed 15% to NHL’s revenues in FY24, is a key area of growth. With ongoing expansions in its oncology services, the company expects to surpass 10,000 surgeries in the next two years. NHL is also ramping up investments in robotic surgeries and advanced cancer treatments like CAR-T cell therapy, an innovative immunotherapy for treating blood cancers.

International Growth through Cayman Islands:**
NHL’s hospital in the Cayman Islands is a significant revenue generator, contributing 20% of total revenue. The newly acquired ENT facility and expanded oncology services in the region are expected to drive further growth. By leveraging its proximity to the U.S. and Canada, NHL is able to offer high-quality medical services at competitive prices, tapping into the lucrative medical tourism market.

Financial Performance and Valuation

Revenue and Profit Growth:
NHL's revenue is expected to grow at a CAGR of 19.93%, reaching ₹8,657 crore by FY27. This growth is supported by strategic investments in new facilities, greenfield projects, and technology-driven healthcare solutions. The PAT is projected to grow at a CAGR of 21.19%, with EBITDA margins improving to 23.6% by FY27, driven by operational efficiencies and higher patient turnover.

Valuation and Price Target:
Chola Securities values Narayana Hrudayalaya at a PER of 31.20x FY27E EPS, resulting in a price target of ₹2,145. This implies a significant +70% upside from the current price. The valuation reflects the company’s strong growth trajectory, leadership in specialized healthcare, and successful expansion into international markets.

Investment Outlook

For Short-Term Investors:
Given the strong price appreciation potential and solid operational performance, short-term investors may consider entering at current levels for a target of ₹2,145 over the next three years.

For Long-Term Investors:
NHL is well-positioned to benefit from structural growth in India’s healthcare sector, including the rising demand for specialized treatments and preventive healthcare. With its robust expansion plans and diversified revenue streams, NHL offers long-term investors a compelling opportunity for sustained growth.

Key Risks

Regulatory and Currency Risks
NHL’s international business, particularly in the Cayman Islands, exposes the company to potential regulatory changes and currency fluctuations that could impact profitability.

High Capex Requirements:
NHL has outlined significant capital expenditures of around ₹4,000 crore over the next 3-4 years, which could strain cash flows if not managed carefully.

Narayana Hrudayalaya’s strategic focus on affordable healthcare, technological innovation, and capacity expansion makes it a compelling investment opportunity for both short-term and long-term investors. The company is expected to continue delivering superior returns, supported by robust growth in key specialties like cardiac and oncology, and enhanced operational efficiencies across its global operations.