Target: ₹410
CMP: ₹360.25
HealthCare Global Enterprises (HCG) is a market leader in 90 per cent cities where it has established presence. The company is operating at an occupancy of ~64% and has been scouting for acquisitions to expand its footprint. In Oct’23, it acquired SRJ Health Care, a 50 beds cancer care hospital in Indore, and in July, it acquired 196 beds established cancer care hospital in Visakhapatnam.
HCG has been focusing on improving traction at its emerging centres; revenue at these had increased at 25 per cent CAGR and EBITDA margin expanded robust 590bps to about 11 per cent over FY22-24. Patient awareness, affordability of medicines and better clinical outcomes are likely to benefit cancer care chains like HCG.
We like HCG’s business model given its focus on niche oncology services; however, challenges like occupancy and ARPOB improvement, cost rationalisation persist with the management to prove the resiliency of its business model. We raise EBITDA estimates by 6-12 per cent for FY25-26E to factor in Vizag hospital acquisition.
Downside risks: Higher competition in oncology and delay in operational turnaround of new centres.