Max Healthcare gains 8%, hits new high post June quarter results

HDFC Securities believes the company is entering a high-growth phase, owing to significant expansion it has planned at strategic locations

Shares of Max Healthcare hit a record high of Rs 309.80 as they rallied 8 per cent on the BSE in intra-day trade on Tuesday after the company reported strong results for the quarter ended June 2021 (Q1FY22), with the highest-ever operating profit and margin. The stock of the healthcare facilities firm surpassed its previous high of Rs 305.50 touched on August 2, 2021.

For Q1FY22, Max Healthcare reported the highest ever network operating Ebitda (earnings before interest, taxes, depreciation, and amortization) at Rs 360 crore, a 37 per cent increase quarter-on-quarter (QoQ). This is the third consecutive quarter of the highest Ebitda both in absolute and margin terms. Operating Ebitda margin improved 309 basis points (bps) to 27.2 per cent in Q1FY22, sequentially.

“Margin expansion was driven by high overall occupancy, improvement in direct costs ratios and significant uptake in COVID-19 vaccination in initial 6 weeks post launch on May 1, 2021, which touched a high of around 48,600 vaccinations /day. The significant improvement in Operating Ebitda is also attributed to the gains from augmentation of clinical programs and structural cost savings undertaken in the last two fiscal years,” Max Healthcare said.

The company’s network gross revenues rose to Rs 1,385 crore during the first quarter reflecting a growth of 124 per cent year-on-year (YoY) and 19 per cent QoQ. This includes Rs 136 crore from vaccinations and related antibody tests post inoculation during the quarter. The company reported profit after tax (PAT) of Rs 205 crore in Q1FY22 against Rs 109 crore in Q4FY21. It had posted loss of Rs 375 crore in Q1FY21.

Max healthcare is the second largest healthcare provider in terms of revenue with best-in-class operating metrics (highest ARPOBs, occupancies) amongst the listed players in India. With a strong management team at the helm led by Abhay Soi, a turnaround specialist, and the backing of KKR, Max has reset and reshaped its strategy for growth, aided by cost initiatives and synergies between Max and Radiant assets, analysts at HDFC Securities said in its initiate coverage.

The brokerage firm believes the company is entering a high-growth phase, owing to the significant expansion it has planned at strategic locations. It expects strong Ebitda CAGRs of 48 per cent/25 per cent over the next two/five years, led by expansion and operating leverage.