Max Healthcare Institute Ltd

Hospital & Healthcare Services

Large Cap Focus

Rs. 469.35
March 20, 2023

Stock Info

Hospital & Healthcare Services
Face Value (Rs)
Equity Capital (Rs cr)
Mkt Cap (Rs cr)
52w H/L (Rs)
482.80 - 326.15
Avg Daily Vol (BSE+NSE)

Shareholding Pattern

(as on 31-Dec)
Public & Others
Source: Ace equity, StockAxis Research

Price performance

Return (%)
Source: Ace equity, StockAxis Research

Indexed Stock Performance

Max Healthcare Institute Ltd Sensex
Max Healthcare Institute Ltd
Source: Ace equity, StockAxis Research

Strong Expansion Plans to Drive The Future Growth

Company Profile

Mahindra Healthcare Institute Ltd. (MHIL) was incorporated in 2001. The company operates a chain of multispecialty, tertiary, and primary healthcare facilities. Post-merger, MHIL has an asset base of 17 facilities with over 3,400-bed capacities. Max’s hospital network consists of 14 owned and leased hospitals, three PHFs, viz, Max Saket East (Devki Devi Society), Max Smart Saket (Gujarmal Modi Society) and Max Patparganj (Balaji Society), and two Radiant hospitals being operated on an O&M basis, viz, BL Kapur (Lahore Hospital Society) and Nanavati.

The company has a dominant presence in the North India region. The company operates predominantly in the Delhi-NCR and Mumbai regions. Around  85% of its beds are located in metro cities.

Investment Rationale

  • Optimising payor mix channels

The company is focusing on optimising its payor mix, along with increasing its utilisation levels.  For the upcoming 300-bed hospital, it has executed an O&M agreement. For 9M FY23 ended the bed share of institutional business has reduced to 29.2% as compared to 34% in FY21 and Self-pay, TPA and Corporate business have increased to 66% from 64% in FY21. This will help the company retain better margins and scalability in their business. Max Healthcare's management projects it would reduce its institutional payor mix to 15% in the next 4-5 quarters, and the company has shown through its track record that reduction in institutional beds is already happening. Expect ARPOB growth to remain high in FY24 on improvement in payor mix.

  • Strong expansion plans (+1500 additional beds by FY25E)

Shalimar Bagh-100 beds should get commercialized in Q4FY23 and 300 beds in Dwarka. The structure is complete and interior work is underway (should get commercialized by Q2FY24). Regarding Phase 1 in Sec 56 Gurgaon-300 beds expansion excavation work has commenced and on track for FY25 operationalization. Nanavati-329 beds expansion contract has been awarded to L&T in Dec-2022 on turnkey basis to hand over the hospital on or before 24 months. It has also acquired land parcels with the potential to add 1000 beds. The company has the aim of increasing the bed capacity by more than 2 times in the next 4-5 years. Previously it has witnessed a Strong track record of successful M&A and turnaround, limited competitive intensity and robust deal pipeline and an adequate headroom for M&A even after brownfield capex, driven by strong free cash flows and low leverage – executed a deal which will add 400 beds to the Network in NCR.

  • High occupancy :

Max Healthcare's occupancy has been rising since 4QFY22 and is now higher than pre-Covid levels. In FY22, Max Healthcare recorded 79% occupancy in Shalimar Bagh, 78% in Saket Complex, 80% in Mohali, and 75%+ in Patparga.


Financial analysis

Five-year financial analysis

The five-year revenue & PAT CAGR of the company is at 19.15% & 107.34% respectively. In FY22 the revenue of the company stood at Rs 4068 crores, an increase of 54% on a YoY basis. The EBITDA of the company stood at Rs 933 crores, an increase of 143% increase on a YoY basis. The EBITDA margin of the company stood at 24%, which increased by 900 bps on a YoY basis. The PAT of the company stood at Rs 605 crores, an increase of 625% on a YoY basis.

Q3 FY23 Analysis

For the quarter that ended 31st December 2022, the revenue of the company stood at Rs 1141 crores, an increase of 17% on a YoY basis. It is also the highest-ever revenue registered in a single quarter in the past three years by the company. EBITDA stood at Rs 313 crores, an increase of 27%  on a YoY basis,and EBITDA margin increased to 27%, gained by 200 bps, on a YoY basis. PAT for the quarter stood at Rs 222 crores, an increase of 17% on a YoY basis.

Risk  & Concerns

  • Intense competition

Given the new wave of opportunities created by the COVID-19 pandemic, rising self-awareness among the masses, and increasing insurance penetration, there is high competition in the healthcare sector.

  • Regulatory risk

The company operates in a highly regulated industry, where consistent changes are made with respect to regulations in the overall industry. Such changes might have a significant impact on the business.

Outlook & Valuation

We like Max Healthcare due to its strongexecution track record and high ROCE. We believe Max Healthcare’s profitability will increase going forward due to an increase in Bed capacity (+1500 additional beds by FY25E), Increase in international patients due to normalisation of international travel, and an improvement in payor mix by lowering patient flow from institutions such as government, and  PSUs. We value Max Healthcare at FY25E EV/EBITDA of 19.5x.We recommend a 'BUY' rating for the stock.


Consolidated Financial Statements