Max Healthcare - Strong Show, Expansion Plans Offer Strong Growth Visibility; Retain BUY

Max Healthcare posted a strong performance in 2QFY27, with revenue/ EBITDA rising by 18/18% y/y, while PAT fell by 20%. Consolidated revenue grew by 18% y/y to Rs30.6bn (up 25% y/y ex-Oncology), while Max Labs/Max@Home revenue came in at Rs660/860mn (up 24/37% y/y). Overall occupancy remained flat y/y at 77%, while ARPP rose 8% y/y to Rs231k. Other Key Highlights: (a) Its board approved Rs930mn capex for redevelopment and clinical capacity enhancement programme at Max Super Speciality Hospital, Sec-128, Noida; (b) Rs4.15bn capex approved for 209 brownfield beds across existing hospitals. This includes 85 beds at MSSH, Noida, 60 beds at MSSH, Vaishali and 64 beds at BLK Max and; (c) Company approved revision of project cost to Rs11bn and timeline for completion of the proposed ~525-bed hospital at Sec-56, Gurugram to Apr-27. Introducing our estimates for FY29 and rolling forward our valuation to 1HFY29e, we maintain BUY rating on the stock with a revised TP of Rs.1,200 (Rs1,220 earlier), valuing its hospital/laboratory business at 30/25x 1HFY29e EV/EBITDA.

Operating Performance: Consolidated EBITDA grew 18% y/y to Rs.8.2bn in Q2FY27, while revenue rose 18% y/y to Rs30.6bn, mainly led by 13% y/y rise in OBDs. EBITDA margin stood at 26.8% (flat on y/y basis). Share of oncology in IPD revenue dropped to 21% from 26% in Q2FY26, owing to discontinuation of select chemotherapy drugs for institutional patients.

Brownfield and Greenfield Expansion Augur Well: Following a Rights Issue and a secondary purchase of 50k shares, its stake in Kalinga Hospital, a 250-bed hospital in Bhubaneswar, rose from ~58.28% to ~66.34% in Q2FY27. The board of directors has approved Rs4bn capex for 209 brownfield beds (a) 85 at Max Super Speciality Hospital (MSSH) Noida; (b) 60 at MSSH Vaishali; and (c) 64 at BLK-Max, along with a multi-level car parking tower at BLK-Max.

Kalinga Hospital Posts Strong Numbers: Kalinga Hospital became a subsidiary of the company on 18th of May-26, marking Max Healthcare's entry into the Odisha healthcare market and establishing a platform for long-term growth in Eastern India. In Q2FY27, the hospital reported revenue and EBITDA of ~Rs.380mn and ~Rs40mn, respectively. Average occupancy stood at 52% during the period. Currently, 80 beds are shut for renovation and a large part of these would be available by Dec-26.

Outlook and Valuation: Despite pressure on oncology business, the company delivered strong results in Q2FY27. Looking ahead, we expect growth prospects to remain intact, led by: (a) ramping up of Max Smart and Max Vaishali; (b) brownfield addition; and (c) beds expansion plans for long-term. Factoring in lower Onco revenues and likely implementation of price caps on Onco drugs, we marginally trim our EBITDA estimates by 3% each for FY27/28E. We expect the company’s revenue and EBITDA to clock 18% each CAGR each over FY26-29e. Introducing our estimates for FY29e and rolling forward our valuation to 1HFY29e, we maintain BUY rating on the stock with a revised TP of Rs.1,200 (Rs1,220 earlier), valuing its hospital/laboratory business at 30/25x 1HFY29e EV/EBITDA.

Key Risks: (a) Delay in project execution; (b) adverse regulations; and (c) lower international business.