HDFC Sec upgrades Max Healthcare on strong expansion-led growth outlook

Domestic brokerage HDFC Securities has upgraded Max Healthcare Institute to ‘Add’ from ‘Reduce,’ citing improving growth visibility, a robust execution track record and comfort on valuations after the recent correction in the stock. 

 

The brokerage has set a target price of ₹1,200, valuing the company at 30x blended Q3FY28E EV/Ebitda.

 

On the bourses, however, Max Healthcare share price was trading 1.75 per cent lower at ₹1,044.75 per share around 11:30 AM. By comparison, BSE Sensex was trading 0.07 per cent lower at 84,637.50 levels.

 

According to the HDFC Securities’ analysts, Max Healthcare is firmly on track with its aggressive capacity expansion plans, which form the core of the upgrade thesis. The company plans to add over 3,000 beds between FY26 and FY28, comprising around 2,100 brownfield and 900 greenfield beds, with a total capex outlay of nearly ₹5,700 crore. These additions are expected to underpin the next phase of long-term growth, largely concentrated in metro and tier-1 markets.

 

For its existing base of over 3,400 beds, HDFC Securities projects revenue and Ebitda CAGRs of around 11 per cent and 12 per cent, respectively, over FY25-FY28E, with margins remaining steady at about 28.5 per cent. Growth from this base is expected to be moderate due to already healthy occupancy levels of 75-76 per cent and high ARPOB of over ₹80,000, which limits sharp upside from volumes or pricing.

 

Near-term growth, however, is likely to be supported by incremental revenues from recently acquired hospitals in Lucknow and Nagpur, along with the continued ramp-up of Jaypee Hospital in Noida. Additionally, several capacity additions are lined up over the next 12-18 months, including 160 beds at Mohali in Q2, 268 beds at Nanavati Hospital, Mumbai, by mid-November 2025, 400 beds at Max Saket in Q3FY26, and 501 greenfield beds at Gurgaon (Sector 56) in Q4FY26.

 

HDFC Securities highlights that nearly 60 per cent of the upcoming additions are brownfield, which should help sustain margins, as cost synergies from brownfield expansions are expected to offset the initial margin drag from greenfield projects. However, the brokerage has built in a margin drag assumption for FY28E, reflecting the addition of around 800 greenfield beds, including facilities at Zirakpur, Mohali, and Patparganj, Delhi (partnered).

 

Factoring in the full expansion pipeline, HDFC Securities estimates revenue and Ebitda CAGRs of 20 per cent and 21 per cent, respectively, over FY25-FY28E, with Ebitda margins expected to remain largely stable at ~26.9 per cent in FY28E. Confidence in execution is reinforced by the company’s past performance, including the swift turnaround of the Dwarka hospital, which achieved nearly 15 per cent Ebitda margins within 12 months, and steady margin improvements at acquired assets.

 

Operationally, the brokerage also notes progress on the insurance front, with cashless enrolment issues resolved with major insurers in Q2FY26, leading to a decline in TPA and corporate share. Business normalisation is expected in H2FY26. Additionally, the recent CGHS price revision is likely to boost revenues by about ₹200 crore, with the full benefit flowing through in FY27.

 

With the stock down over 15 per cent in the past six months, HDFC Securities believes current valuations already factor in margin concerns. The brokerage sees the correction as an opportunity, backed by strong execution, a long runway for capacity-led growth, and improving visibility on earnings.

 

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