纳拉亚纳·赫鲁达亚拉亚有限公司（NARH IN）：减持：增长回升尚需时日

Disclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications intheDisclosure appendix, and with the Disclaimer, which forms part of it.Operational beatvsour estimates in 4QFY25, mainlyonbetter-than-expected pickup in new Cayman unitBenefits from bed expansion in India segment are3-4 yearsaway,in our view;gaugingvolume trends in CaymanunitsRetainReduce, revise TP to INR1,220(from INR1,100)Operational beat in 4QFY25:EBITDA margin at 24.2%wasnotablyaboveHSBCeandconsensus,mainly on operating leverage benefitsled by faster-than-expected pickup inoperations at the new hospital in the Cayman Islands.The new unit, after startingoperations in late 2024, offers all services and is seeing notable footfall,per management.Consolidated revenue at INR14.8bn grew 15.3% y-o-y(+18.4% excluding the Jammu unitdiscontinued in 4Q).Revenue from India operations at INR11.1bn (74% of4Q) grew7%y-o-y (+10.7%excluding Jammu). EBITDA for India operations (including loss for newinitiatives such asinsurance, clinics) at INR2.1bn grew 9.1% y-o-y. Revenue fromCayman operations (HCCI) at USD44.1m (26% of 4Q) grew 45.1% y-o-y, helped byastrongpick-up inoutpatientfootfallat the new unit.India expansion benefits are backloaded:For the core India hospital segment(excluding newinitiatives), NH saw c200bp EBITDA marginexpansionoverpast twoyears,mainly ledbyimprovedthroughput and better realization on premiumization ofexisting beds. As most of its existing hospitalsoperateat high occupancy(60-65%),we believe new beds will be critical to sustain revenue and EBITDAgrowth. WeassumeanIndia segment CAGR of 10.3% over FY26-28e (vsmid-tohigh-teensformost peers).It plans to add 1,935 beds overthenext 3-4 years (c34% expansion tocurrent capacity of 5,745 beds; exhibit 2).Withmost of these bedstocome in FY28,we believe benefits from capacity expansion remain backloaded. The newCaymanhospital is off to a good start,helped by healthy footfall and better cost managementby sharing doctors and other expensesbetweenitstwo hospitalsthere.However, weremain watchful onCaymanvolume trends.Retain Reduce ratingandincreaseTPby c11%toINR1,220:WeadjustFY26-27eestimatesmainly toreflectlosses associated with newer initiativesintheIndiabusinessand adjustthetax rate per management indication. These adjustments resultinEPSestimate cuts of3.2%in FY26eand4.5% in FY27e.Despitethese,we increaseourDCF-driven TP toINR1,220(from INR1,100)as we assume higher terminal growth of6.65% (vs 6.5%) to account for its long-terms projects. OurrevisedTP implies c29%downside and weretain our Reduce rating as we believe it will be a while before NH cansee a significant pickup in revenue and earnings growthin India led by new bedadditions.We keep a watch out for execution at the newCayman hospital.Narayana Hrudayalaya Ltd(NARHIN)Reduce: Growthpickupisa while away ◆◆◆ 36%NARH INNARY.BO03/2028e55.4131.121.618.61000.001500.002000.0005/25 2Financial statementsYear to03/2025a03/2026e03/2027e03/2028eProfit & loss summary(INRm)Revenue54,83061,88269,44877,448EBITDA12,28213,58415,33616,855Depreciation & amortisation-2,781-2,803-2,952-3,020Operating profit/EBIT9,50110,78112,38513,835Net interest-1,464-1,567-1,724-2,013PBT8,88210,31811,98613,398HSBC PBT8,88210,31811,98613,398Taxation-1,457-1,651-1,918-2,144Net profit7,4208,66710,06811,255HSBC net profit7,4958,66710,06811,255Cash flow summary(INRm)Cash flow from operations8,22011,56511,27712,879Capex-10,790-9,521-13,478-14,927Cash flow from investment-13,417-9,521-13,478-14,927Dividends-812000Change in net debt5,394-3,025999595FCF equity-3,0961,920-2,325-2,172Balance sheet summary(INRm)Intangible fixedassets2,4322,6103,0063,920Tangible fixed assets41,08447,62457,75468,747Current assets25,49832,79737,40743,466Cash & others6,46713,49217,49322,898Total assets72,65086,666101,803119,768Operating liabilities12,52913,87713,94714,657Gross debt22,13426,13431,13437,134Net debt15,66612,64113,64114,235Shareholders' funds36,26444,93154,99966,253Invested capital50,01855,66166,72878,577Ratio, growth and per share analysisYear to03/2025a03/2026e03/2027e03/2028eY-o-y % changeRevenue9.312.912.211.5EBITDA6.610.612.99.9Operating profit4.413.514.911.7PBT-0.016.216.211.8HSBC EPS-5.015.616.211.8Ratios (%)Revenue/IC (x)1.31.21.11.1ROIC18.617.117.016.0ROE23.021.320.218.6ROA13.412.512.211.7EBITDA margin22.422.022.121.8Operating profit margin17.317.417.817.9EBITDA/net interest (x)8.48.78.98.4Net debt/equity43.228.124.821.5Net debt/EBITDA (x)1.30.90.90.8CF from operations/net debt52.591.582.790.5Per share data(INR)EPS Rep (diluted)36.5342.6749.5755.41HSBC EPS (diluted)36.9042.6749.5755.41DPS0.000.000.000.00Book value178.55221.22270.80326.21Valuation dataYear toEV/salesEV/EBITDAEV/ICPE*PBFCF yield (%)Dividend yield (%)* Based on HSBC EPS (diluted)ESGmetricsEnvironmental IndicatorsGHG emission intensityEnergy intensityCO2reduction policySocial IndicatorsEmployee costs as % of revenuesEmployee turnover (%)Diversity policySource: Company data, HSBC