Medanta - On Robust Runway For Sustainable Growth: Motilal Oswal

Motilal Oswal Report

Over the past four years, Medanta Operator Global Health Ltd. has delivered a stupendous performance (three times earnings), witnessing a 35% Ebitda compound annual growth rate. Moreover, it turned net cash in FY23 from a net debt of Rs 3 billion in FY19. Since listing in Q3 FY23, the stock has more than doubled today.

Interestingly, over FY23-26E, the outlook remains strong, on the back of a healthy pipeline of beds being added to the existing facilities (552 beds) and the upcoming ones in Noida, Indore, and South Delhi (1,000 beds on a combined basis).

Additionally, average revenue per occupied bed is expected to witness a 6% CAGR due to the improving case mix/payor mix. Moreover, we expect ARPOB of mature/developing facilities to reach Rs 70,000/Rs 67,000 at 5%/6% CAGR, respectively, over FY23-26.

We expect 28% earnings CAGR over FY23-26, factoring-

1. faster scale-up of existing hospitals,

2. additional business from new hospitals and

3. better operating leverage.

Accordingly, we value Medanta at 26 times 12-month forward enterprise value/Ebitda to arrive at our target price of Rs 1,170. We reiterate our 'Buy' rating on the stock.

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