Motilal Oswal’s recent analysis of Max Healthcare Institute Ltd (MAXH) suggests a promising growth trajectory backed by robust revenue generation and strategic expansions across multiple healthcare segments. The firm has issued a Buy recommendation for MAXH, with a target price of Rs 1,240, indicating a potential upside of 15% from the current level. This report examines MAXH’s financial performance, operational strengths, and growth strategies that contribute to Motilal Oswal's positive outlook.

Summary of Financial Performance and Growth Outlook

Revenue and EBITDA Growth: Max Healthcare posted a 23.3% year-over-year (YoY) revenue increase in 2QFY25, totaling Rs 21.2 billion, driven by high occupancy rates and an improved case mix. The EBITDA margin stood at 26.8%, with an annualized EBITDA per bed rising to Rs 7.8 million. Adjusted PAT showed moderate growth, up 4.9% YoY.

Investment Recommendation: With a target price of Rs 1,240, Motilal Oswal highlights MAXH’s strong potential for expansion through brownfield projects, increased patient volumes, and advanced payor mix strategies, further justifying the Buy recommendation.

Key Growth Drivers

Enhanced Patient Volume and Case Mix: MAXH’s occupancy rate rose to 81% in 2QFY25, up from 77% YoY, alongside a 2% YoY rise in Average Revenue per Occupied Bed (ARPOB) to Rs 76,100. This improvement was driven by increased cases in oncology and general surgery, contributing significantly to revenue growth.

MaxLab and Max@Home Expansion: MaxLab reported a 500 basis points YoY rise in its EBITDA margin, capitalizing on greater footfalls and enhanced average realization. Similarly, Max@Home saw a 24.4% YoY revenue boost, supported by strong demand in critical care and medical rooms. These segments are expected to continue growing at 24% and 21% CAGR, respectively, over FY25-27.

Strategic Expansion of Healthcare Facilities

Significant Bed Capacity Additions: MAXH has been proactively enhancing its capacity, with an expected 30% increase in operational beds by FY26. Expansion efforts include operationalizing 240 beds across Sahara and Jaypee hospitals, along with brownfield expansions across its Nanavati, Patparganj, Nagpur, and Saket complexes. These projects collectively represent an addition of 968 beds, bolstering MAXH’s ability to meet rising healthcare demand.

Brownfield and Greenfield Projects: The company has allocated capex for an additional 2,600 brownfield beds over the next three years and is developing new sites in Gurgaon and Lucknow, which will collectively add 1,550 beds. MAXH’s ongoing project in Gurgaon, estimated at 300 beds, is slated for completion by 3QFY26.

Improvements in Revenue Realization

ARPOB Optimization: In the first half of FY25, ARPOB saw a 2.6% YoY increase to Rs 76,600, while core facilities achieved a 6.8% growth in ARPOB due to higher demand for high-value services and price adjustments across self-pay, insurance, and institutional segments. This improvement reflects an optimized payor mix, with self-pay revenue share rising by 140 basis points YoY to 35.1%.

Projected ARPOB Growth: Looking forward, MAXH anticipates a 5% CAGR in ARPOB, potentially reaching Rs 87,400 by FY27. This growth is expected to be driven by sustained demand in high-value medical specialties and ongoing revisions in service prices.

Expansion in Diagnostic and Homecare Segments

Diagnostic Business Growth through MaxLab: MaxLab reported a YoY revenue increase of 22.5% in 1HFY25, reaching Rs 870 million. This growth was attributed to an expanded network of over 1,150 partners and increasing demand across 50 cities. MaxLab is projected to achieve a revenue CAGR of 24% over FY25-27.

Homecare Segment’s Steady Expansion: Max@Home achieved a 24.4% YoY growth, driven by demand in its critical care, medical rooms, and physiotherapy services. Motilal Oswal expects this segment to sustain a 21% revenue CAGR, leveraging MAXH’s broad service offerings and expanding client base.

Management Outlook and Expansion Strategies

Future Bed Additions: MAXH has outlined an aggressive expansion plan, aiming to open additional facilities and ramp up operational beds across multiple locations. Upcoming projects include the 400-bed Max Smart facility, scheduled for 1QFY26, and a 250-bed hospital in Mohali, expected by FY28.

Strengthening International Patient Business: MAXH’s international patient base contributed 5.5% to total beds and generated 9% of revenue in 2QFY25. Key regions include Jaypee Hospital, Noida, which sees considerable international footfalls.

Valuation and Investment Recommendation

Valuation Metrics: MAXH is trading at a forward P/E of 71.4x for FY25 and 54.1x for FY26, with an EV/EBITDA multiple of 47.1x and 37.0x, respectively. Motilal Oswal’s Sum-of-the-Parts (SoTP) valuation model, incorporating EV/EBITDA for the hospital and MaxLab segments and EV/Sales for Max@Home, supports the target price of Rs 1,240.

Strong Earnings Growth Potential: MAXH is expected to achieve a 20% earnings CAGR over FY25-27, fueled by strategic expansion and ongoing demand for its specialized medical services. This growth, combined with robust EBITDA margins and efficient capital deployment, reinforces the Buy recommendation.