Max Healthcare builds growth runway with brownfield expansion push

Healthcare major Max Healthcare Institute delivered a healthy performance in the second quarter (July-September) of 2025-26 (Q2FY26). Strong patient volumes and average revenues not only boosted the top line but also aided the operating performance. Going ahead, the triggers for the company are brownfield expansions and traction in international patients. At the current price of ₹1,180, the stock is trading at 52 times its FY27 earnings estimates.

 

Revenues for the hospital chain were up 21 per cent and were in line with estimates. The gains on the revenue front were led by patient volumes growing 22.5 per cent, and average revenue per operating bed (ARPOB) rising by 1.4 per cent over the year-ago quarter. 

A steady ARPOB, stable occupancy, and the addition of new beds together led to a 19 per cent increase in occupied bed days. International patient revenue was higher by 25 per cent year-on-year (Y-o-Y), which now contributes 9 per cent to overall revenue. The existing units posted a strong 14 per cent like-for-like revenue growth, reflecting sustained operational momentum across the network. 

Profitability was a mixed bag. While gross margins were down 125 basis points (bps) Y-o-Y, operating profit margins were higher by 53 bps. The gains on the margin front came through despite increase in employee costs and other expenses as the rise was offset by higher revenues.

 

The company’s margin profile, according to Choice Equity Broking, remains among the strongest in the sector, with a network operating profit margin at 26.9 per cent, and of existing units at 27.5 per cent.

 

Deepika Murarka and Maitri Sheth of the brokerage point out that a major structural tailwind comes from the recent Central Government Health Scheme (CGHS) tariff revision, which is expected to add ₹200 crore annually once fully implemented, expected from FY27. Combined with optimisation at new units, case-mix upshift towards oncology, and continued cost discipline, the margin profile is expected to improve going ahead. Choice Equity Broking has upgraded the rating for the stock from “reduce” to “add”, and revised its target price to ₹1,250.

 

The expansion is expected to improve its revenues as well as margins. The company is planning to scale up its bed capacity from 5,000 in FY25 to 9,000-9,500 by FY28. The capacity expansion is led by brownfield additions of Nanavati Max (268 beds), Max Smart Saket (400 beds), and Max Mohali (160 beds).

 

Emkay Research points out the hospital is set to add 1,500 beds over the next 18 months, the majority of which would be brownfield in nature, entailing a quick rampup in occupancies.

 

Anshul Agrawal and Vivek Sethia of the brokerage expect a 21 per cent revenue growth over FY25-FY28, with occupied bed days and ARPOB of 18 per cent and 3 per cent, respectively.

 

The hospital’s increasing focus on international patients and brownfield expansions should improve the margin trajectory ahead, with the metric rising by 200 bps over FY25-FY28, says the brokerage. It has an “add” rating, with a target price of ₹1,250.

 

Despite the expansion, the leverage is expected to be low. The company deployed ₹456 crore towards capex in Q2FY26 while net debt remained comfortable at ₹2,067 crore, translating to a net debt to operating profit of around 0.79 times.

 

Aman Goyal of Axis Securities says: “Brownfield assets typically ramp up faster, achieve quicker operating profit breakeven, and enhance earnings visibility. Strong internal accruals and disciplined capital deployment are expected to keep leverage below 1 through the expansion cycle, supporting sustained growth and value creation.”

 

The brokerage has a “buy” rating, with a target price of ₹1,425.