Shares of Global Health, Medanta's parent company, have given mutibagger returns since its listing on November 16, 2022. The healthcare firm's stock has climbed 99.21 per cent year-to-date (YTD) and has risen over 128 per cent since its listing at Rs 401. As compared to its issue price of Rs 336, the stock has given 172 per cent returns to investors.

What is driving the rally in Global Health (Medanta) stock? 

1) Developing hospitals

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According to Narendra Solanki, Head, Fundamental Research - Investment Services, Anand Rathi Shares, and Stock Brokers, the continued success of developing hospitals in Lucknow and Patna is likely to aid growth for Medanta in the future. He added that revenue has been scaling up in developing hospitals since FY19.

2) Planning to raise bed capacity 

While the company added nearly 1,000 beds, taking the total bed capacity to 2,725 in 1QFY24 from 1,722 in FY19, the company is planning to raise the installed bed capacity by 25 per cent to nearly 3,400 beds by FY25E. 

Of this planned expansion, 52 per cent will be in the Tier-2 cities of Lucknow and Patna, and 60 per cent will be at existing hospitals, resulting in lower capex per bed.

3) Setting up new hospitals

The company, along with real estate developer DLF, has announced its plan to set up a 400-bed super specialty hospital in South Delhi.

According to Solanki, this will intensify the company’s presence in Delhi-NCR, taking the total bed count to 4,000 over the next three to four years.

4) Good hospitals’ track record and experience

Solanki believes that the Lucknow Hospital is well invested and presents significant room for medium-term growth and profit margin expansion. 

5) Strong financials

In Q2FY24, Global Health (Medanta) reported a 46 per cent year-on-year (YoY) rise in net profit at Rs 125 crore. The hospital operator's revenue for the quarter came in at Rs 844 crore, reflecting a 24 per cent rise YoY from Rs 679 crore.

6) One of the top performers in the healthcare sector

The efficiency of the hospital industry is measured based on key metrics such as occupancy rates and average revenue per operating bed (ARPOB). Here, Medanta's occupancy rate was 65 per cent in Q2, while the industry average is about 60 per cent. Similarly, the average revenue per operating bed is at Rs 61,003 for the company, while for Apollo, it is at Rs 57,400 per bed, for Fortis, it is at Rs 60,000 per bed, and for Aster DM, it has a domestic ARPOB of Rs 39,400. 

Here's what brokerages suggest on Global Health (Medanta)

Smifs retained an 'accumulate' rating on the stock for a target price of Rs 1,018 apiece. 

The brokerage is bullish on the company's strong financials and management commentary of operationalising the Noida facility in two years’ time, leveraging its healthy balance sheet and operating cashflows. 

Motilal Oswal, in its report post-Q2 results, had also chosen 'Global Health (Medanta) as its top pick. 

Markets Mojo has picked Medanta as the stock of the month for its November series on the back of the company's good financial metrics and cash-rich position of Rs 604 crore, which they believe will enable their expansion without burdening their financials. 

"If we compare valuation with other industry stocks, there is still more than 50 per cent upside move possible. The business model looks good," said Vaibhav Kaushik, Research Analyst, GCL Broking.

He gave a target price of Rs 1,400 in the next one year.

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