PL Capital
Target: ₹1,700
CMP: ₹1,363.65
delivered modest EBITDA growth of 11 per cent CAGR over FY23-26, reflecting the absorption of about 780 beds added during its aggressive expansion cycle, which has now largely concluded.
The company continues to benefit from industry-leading margins, strong FCF generation, a net cash balance sheet, and healthy return ratios, aided by its asset-light hub-and-spoke model, unique position as India’s only integrated multi-specialty pediatric healthcare platform, and differentiated full-time doctor engagement model.
The slowdown in FY26 was largely driven by seasonal headwinds and start-up losses of new bed commissioning.
Recently, Rainbow has strengthened its growth engine through leadership appointments, including a new CEO, Chief Growth Officer and hiring new clinical talents with more focus on tertiary and quaternary cases.
This will aid better clinical mix and help them to reduce dependence on seasonality.
Overall, we expect mature unit’s occupancy to normalize toward 56-58 per cent in FY28 from current level of 51 per cent. Further upside is expected from the gradual ramp-up of the international patient business.
With newly commissioned capacities entering the ramp-up phase and occupancy levels expected to improve, we forecast Pre IND-AS EBITDA growth of 20 per cent CAGR over FY26–FY28E.
We recommend ‘Buy’ rating with TP of ₹1,700/share, based on 26x FY28E Pre-IND-AS EV/EBITDA.