Up 225% in two years! Is this multibagger hospital stock worth buying post Q2 show?

Brokerage firms continue to remain positive on Global Health, which run its hospital chain under 'Medanta' brand name. Post Q2 results, analysts tracking the stock believe that the multibagger counter has turned attractive post the recent correction and its strategic expansions plans are set to lead the recovery in the coming quarters.

Global Health Ltd reported a 4.5 per cent year-on-year (YoY) jump in net profit to Rs. 130.8 crore in Q2FY25 on the back of higher revenue from matured and new hospitals, along with higher patient volumes. The company net profit of Rs 125.2 crore in the corresponding quarter of the previous year. 

The hospital chain's revenue from operations rose 12.7 per cent YoY to Rs 975 crore in the reported quarter. Ebitda for the quarter rose 5.5 per cent YoY to Rs 247 crore, while Ebitda margins stood at 25.3 per cent in Q2 FY25. The company net cash surplus was at Rs 719 crore at the end of September 30, 2024.

Global Health performance was much ahead of estimates on all fronts mainly on account of robust growth momentum across all network hospitals. The growth was driven by better operating matrix such as higher patient volumes, increase in bed occupied days and improvement in realization, said the brokerage firms.

On-going expansion efforts, and an increased focus on government business, may temporarily constrain margins at developing hospitals, said JM Financial. "We anticipate an improvement in Lucknow's performance in the medium term as the company
enhances its clinical team, invests in technology and continues to strengthen its engagement with the local community."

Mature hospitals within Medanta's portfolio continue to exhibit double-digit growth as the company take tariff increases at Gurugram and Indore. Its upcoming major hospital projects in Noida, South Delhi, Mumbai and Pitampura O&M project are expected to be strategically located and will contribute significantly to future growth, JM added with a 'buy' rating a target price of Rs 1,400.

Share of Global Health Ltd settled at Rs 1086.40 on Tuesday, rising nearly half a per cent for the day. The total market capitalization of the company slightly below Rs 30,000 crore. The stock has corrected nearly 30 per cent from its 52-week high at Rs 1,513.75 hit in April 2024.

Medanta has a network of five hospitals currently in operation in Gurgaon, Indore, Ranchi, Lucknow, and Patna having 3,008 installed beds as on September 30, 2024. It also has one hospital under-construction in Noida. During the quarter, 52 beds were added at Lucknow and 66 beds at Patna resulting in total bed addition of 118 beds during the quarter.

Medanta reported a strong Ebitda beat in Q2FY25 led by continued strength in mature hospitals and higher-than-expected sequential recovery in Lucknow, said Kotak Institutional Equities. "We expect the margin ramp-up in Medanta’s mature hospitals and Patna, offset by margin decline in Lucknow, to drive an overall Ebitda CAGR of 16 per cent over FY2024-27E," it said.

The stock has corrected sharply from its peak owing to challenges in Lucknow and we expect a gradual recovery hereon to assuage investor concerns, Kotak added. "Accordingly, we upgrade the stock to 'add' (from reduce) with fair value of Rs 1,175 (Rs1,100 earlier)." 

Global Health was listed at the bourses in November 2022, when the company raised a total of Rs 2,205.57 crore via IPO, where is sold shares for Rs 336 apiece. The stock has delivered a strong 225 per cent returns from its IPO price in the last two years.

The 300-bed Noida facility, initially guided for FY25, is now expected to be operational by Q1FY26. Additionally, 100 beds each at the Lucknow and Patna facilities are set for launch over H2FY26E, leveraging the company’s strong balance sheet and operating cash flows, said brokerage firm SMIFS.

"Over next four years, the plan is to add 500 beds in South Delhi, with equal contributions from DLF and Medanta, along with 500 beds in Mumbai plus 750 beds at Pitampur in partnership with Dr Narayan Trust Society. Onboarding of new doctors, new bed addition and introduction of robotics are leading to lower Ebitda in FY25E," it said with a 'buy' tag and a targe price of Rs 1,289.

Choice Broking maintain a 'hold' rating on Medanta due to anticipated margin pressures over the coming years brought on by continued expansion plans and no tariff increases for the current fiscal year. The company is in a capex phase, planning to invest Rs 2,800 crore over the next five years, which may impact margins during FY25-27E, it said with a target price of Rs 1,146.