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Target: ₹1,475
CMP: ₹1,190
We initiate coverage on Global Health Ltd (Medanta), with a Buy recommendation, and DCF-based target price of ₹1,475 (EV/EBITDA of 26.5x FY27E EBITDA).
Medanta boasts a robust Brand Equity, established by Dr Trehan, a globally recognised cardiovascular, and cardiothoracic surgeon. The company has fortified its position, with a strong moat, providing the highest standard of care, and specialising in high-complexity work. A diverse revenue mix, notably from complex specialties like Cardiac, Digestive, Oncology, and Neuro (constituting 59 per cent of overall revenue), contributes significantly to its financial profile.
Additionally, the Institute of Liver Transplantation, Kidney and Urology, Orthopedics, and Internal Medicine involve intricate procedures, further propelling the company’s topline growth. Medanta is strategically positioned for significant growth, and plans to achieve a 1.4x capacity expansion, across existing facilities, from the current total bed capacity of 2,823. The company aims to add 1,394 beds in the next three years.
Medanta has a strong FCFF/EBITDA conversion ratio of about 60 per cent, which is the highest in the industry. This makes it capable of funding the upcoming expansion plans internally. It could generate FCFF of ₹900-1,000 crore per year after incurring a minimal Capex of ₹300 crore per year over the next three years.
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