Broker’s call: Max Healthcare (Buy)

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Target: ₹1,240

CMP: ₹1,054.10

Max Healthcare has aggressively increased its bed capacity through both organic and inorganic routes over the past three years. Since FY21, the company has acquired five hospitals with a combined bed capacity of 1,950 at a total cost of ₹3,000 crore. The acquired entities also include land parcels, which will allow for further expansion of bed capacity over time

Going forward, Max Helathcare plans to add 2,400 beds to its total bed capacity of about 6,700, with a capex of ₹4,000-4,500 crore over the next 3-4 years.

Despite heavy capex, the company has comfortably maintained its liquidity position. Max Healthcare has strategically expanded its presence in the UP market over the past six months and has established itself as a key player in this market. The company has registered a robust 96 per cent CAGR over FY21-24. We expect 20 per cent/18 per cent EBITDA/PAT CAGR over FY24-FY26 fueled by a higher ARPOB, addition of new beds, and improved occupancy at existing hospitals

We value Max Healthcare on an SOTP basis (35x EV/12M forward EBITDA for the hospital business, 26x EV/12M forward EBITDA for Maxlab, and 6x EV/sales for Max@Home) to arrive at our TP of ₹1,240.