Medanta shares rise 4% to hit new highs; stock turns multibagger within 7 months of debut

Shares of Global Health, the parent company of Medanta, rallied more than 4 per cent during the early trading session on Thursday. The recently listed private hospital chain turned multibagger within just seven months of its debut at Dalal Street in November 2022.

Shares of Global Health (Medanta) rose over 4 per cent to Rs 682.40 on Thursday, hitting its new highs. The private hospital had issued its shares at Rs 336 apiece as the company raised more than Rs 2,205 crore through its primary stake sale. Medanta's shares have delivered a return of 104 per cent from its issue price so far.

Global Health, promoted by Dr Naresh Trehan, is one of the largest private multi-speciality tertiary care providers operating in the North and East regions of India with 'Medanta' as its brand name. It has key specialities in cardiology and cardiac science, neurosciences, oncology, digestive and hepatobiliary sciences, orthopaedics, liver transplant, and kidney and urology.

Global brokerage firm JP Morgan has initiated coverage on Indian Hospitals and said that the Indian hospitals' sector has outperformed the BSE Healthcare Index and Nifty Index by 190 per cent and 152 per cent, respectively, in the past 3 years, driven by structural demand, prudent cost management and capex discipline.

"We initiate coverage on India’s largest healthcare service providers with a positive outlook premised on compelling growth prospects for the industry. We forecast a 19% EBITDA CAGR over FY23-26E for our covered companies," it added with a 'neutral' rating on Medanta with a target price of Rs 710, suggesting an upside of 9 per cent from its previous close at Rs 654.4.

Earlier this month, GQG Partners, Oaktree Capital and Blackrock Financial were among the investors, which met the management of Global Health. Blackrock Financial, Wellington Management, Allspring Global, Putnam Investments, Loomis Sayles and Redwood Investments had a one-to-one meeting with Global Health in Boston, US, as per the company filing.

Global Health reported net profit of Rs 101 crore net profit in Q4FY23, a year-on-year (YoY) jump of almost five times due to increase in bed capacity and higher in-patient footfalls. The company reported net profit of Rs 17.5 crore in Q4FY22. Revenue rose 37.3 per cent YoY to Rs 732 crore as Medanta clocked its highest ever quarterly revenue.

The EBITDA came in at Rs 192 crore, rising 108 per cent on a yearly basis, while EBITDA margins expanded 890 basis points (bps) YoY to 26.2%. Occupied bed days increased by 25.6 per cent YoY, representing an occupancy of 58 per cent on increased bed capacity.

JM Financial said that Medanta’s earnings surprised positively, driven by better EBITDA margins and higher other income coupled with a lower tax rate. It sees new hospitals contribute 33 per cent to revenues in FY23. The new hospitals have ramped-up exceptionally well but will optically lower the overall ARPOB and occupancy level over the next two years post-addition of 600 beds.

"We remain conservative on our margin assumptions due to cost increases amid bed additions; payer mix normalising in Patna and Lucknow; and Noida launch by end of FY25. However, we expect the benefit of recent price hikes to fully reflect in FY24. We continue to believe in Medanta’s consistent earnings growth with margin expansion," it added with a buy tag.

SMIFS Institutional Research had an 'accumulate' rating on the stock with a target price of Rs 642, which has already been met. The brokerage was positive on the stock over better payor mix, expansion of bed capacity and operating leverage due to in-house doctors.

"Medanta, has experienced good growth due to ramp up in Patna and Lucknow facilities. Additionally, the base business has also shown improvement in terms of EBITDA, indicating that the doctor led model is leading to operating leverage. Improvement in overall occupancy will be a key driver for Medanta’s overall EBITDA as there is big room to grow further," SMIFS said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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