Max Healthcare rallies 20% in 5 days; nears record high on healthy outlook

On March 12, Max Healthcare board approved the proposal to enter into a Long-term Service Agreement with Bharat Prakritik Chikitsa Mission, a society which is setting up a 200-bed hospital in Delhi

Max Healthcare Institute (Max Healthcare) shares traded higher for the fifth straight day, surging 5 per cent to Rs 1,189.25 on the BSE in Friday’s intraday trade on a healthy outlook. Thus far in the current week, the stock price of the hospital company has surged 20 per cent, as compared to the 3 per cent rise in the BSE Sensex. It is trading close to its record high level of Rs 1,227.50, touched on January 8, 2025.

 

On March 12, 2025, Max Healthcare announced that the company’s board approved the proposal to enter into a Long-term Service Agreement (LTSA) with Bharat Prakritik Chikitsa Mission (BPCM), a society which is setting up a 200-bed hospital in Pitampura, Delhi.

 

The construction of the hospital premises is expected to be completed within the next three to four years. Max Healthcare said the company shall provide an interest-free, refundable deposit linked to construction milestones as a guarantee against its performance obligations under the LTSA, once the hospital is ready for commissioning.  ALSO READ | Stock Market LIVE: Sensex climbs 370 pts to 76,720; Nifty above 23,300; Auto, Realty gain

 

Max Healthcare is a prominent integrated healthcare service provider, engaged in provision of healthcare services through primary care clinics, multi speciality Hospitals/ medical centres and super-speciality hospitals facilities. These include 'managed facilities' and medical facilities of third party healthcare service providers, with whom the company has entered into long term service contracts for providing operation and management, medical services, clinical, radiology, pathology services and related healthcare services.

 

India's healthcare sector is experiencing major growth and transformation, driven by various factors, including increased government expenditure, rising health insurance penetration, and a growing demand for healthcare services.

 

Max Healthcare is well-positioned for earnings growth, with solid foundations in place. Additionally, the company plans to double its bed capacity within the next three years, which could further boost its prospects.  ALSO READ | Glenmark Pharma share rises 2% on securing USFDA nod; key details here

 

Meanwhile, in the past one year, Max Healthcare has outperformed the market by zooming 57 per cent, as against the 5.4 per cent rise in the BSE Sensex.

 

During the 9 months (April to December), Max Healthcare generated Rs 1,025 crore of free cash flow from operations after interest, tax, working capital changes and routine CAPEX. Rs 793 crore was deployed towards ongoing expansion projects and upgradation of facilities at acquired hospitals, Rs 146 crore was distributed as dividend and Rs 1,716 crore was used for the Jaypee acquisition.

 

Buoyed by expansion plans (75 per cent of FY24 capacity), analysts at Emkay Global Financial Services expect network revenue/Ebitda CAGR of 25 per cent/ 26 per cent, respectively, over FY24-27E. Strong valuations (at 30 per cent premium to the sector average), though, leave scant room for an upside.  ALSO READ | TVS Motor share price gains 4% on declaring interim dividend for FY25

 

Max’s history of augmenting revenue potential of its portfolio hospitals sets it apart from competition. Strategic locations, higher complex and surgical case mix, and superior execution prowess are the company’s key moats. Without deviating from its strategy of brownfield focused expansion, Max’s next phase of growth is unlikely to dilute return ratios. Internal accruals adequately support current expansion plans, while balance sheet size provides optionality for merger & acquisitions (M&As), the brokerage firm had said in its January 2025 initiate coverage report.