Max Healthcare - Growth Priced-In; Valuation Rich, Time For Breather: HDFC Securities

HDFC Securities Institutional Equities

We downgrade Max Healthcare Institute Ltd. to Reduce (from Add earlier) with a target price of Rs 880, based on a 29 times blended Q1 FY27E enterprise value/Ebitda (versus FY26E EV/E), as we believe that the strong run-up in the stock price (up 28%/51% in last 6/12 months) factors most of the growth triggers.

The valuation has turned rich (trades at 39/31/27 times on FY25/26/27E EV/E versus its average of ~26 times) and provides limited upside.

While its capex plan is largely on track (to add 3,000+ bed capacity over FY25-27 with capex outlay of ~Rs 47 billion) to support long-term growth, near-term concerns exist on limited headroom for volume growth for its existing hospital network (occupancy at 75-76%) and moderate average revenue per occupied bed growth as it is already at a higher level of Rs 76,000+. Factoring in the commissioning timeline change for the few hospitals, we cut Ebitda estimates by 3% for FY25/26E.

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