JP Morgan MEDANTA-In Indian Hospitals - Ripe To Absorb Expansion - Initiating C

This document
J Pis M
being
O provided
R G AforNthe exclusive use of M ILAYARAJA at VIKRAM SARABHAI
Asia Pacific LIB IN INST
Equity Research
MGMT AHM. 15 June 2023
Indian Hospitals
Ripe to absorb expansion; initiating coverage
The Indian hospitals sector has outperformed the BSE Healthcare Index and Nifty Pharmaceuticals & Healthcare
Index by 190% and 152%, respectively, in the past ~3 years, driven by structural Services
demand, prudent cost management and capex discipline. After consolidating bed Bansi Desai, CFA AC
capacities over FY19-23, most players are looking to expand capacities (91 22) 6157 3581
aggressively, albeit strategically, to fuel the next leg of growth. We initiate [email protected]
Bloomberg JPMA DESAI <GO>
coverage on India’s largest healthcare service providers with a positive outlook
premised on compelling growth prospects for the industry. We forecast a 19% Gopal Bhatt
(91-22) 6157-3271
EBITDA CAGR over FY23-26E for our covered companies. Improved [email protected]
profitability, strong B/S and FCF generation should enable companies to fund J.P. Morgan India Private Limited, J.P. Morgan
expansion and also allow them to explore M&A opportunities. Initiate at OW on Tower, Santacruz(E), Mumbai - 400098, SEBI
Registration: INH000001873, (91-22) 6157-3000.
Apollo (PT Rs5,950/sh), and Fortis (PT Rs355/sh), Neutral on Max (PT Rs620/sh)
and Medanta (PT Rs710/sh).
India’s healthcare delivery market is
expected to grow by 15-17% CAGR till FY25
• India healthcare – Secular growth, supply shortages offer promising
Rs tn
growth prospects: At 15 beds per 10,000 people, India ranks among the lowest
9.0
in the world, despite carrying 20% of the global disease burden. India’s steep 8.0
15-17%
7.67tn
7.0 5.6
CAGR
demand-supply gap, rising health insurance penetration, increase in lifestyle 6.0
4.3tn
5.0tn
5.0 11%
diseases, change in demography and rise in medical tourism present significant 4.0
2.5tn
CAGR
3.0
3.5
3.0
opportunities for private players given gov’t spending on healthcare remains 2.0 1.6
2.1
1.0 1.5
1.3
low at ~1.6% of GDP as of FY21. Per CRISIL estimates, the hospitals industry 0.0 0.9
FY16 FY21E FY22P FY25P
accounts for ~61% of India’s healthcare market and will record a 15-17% IPD OPD
CAGR to Rs7.7tn (~$93bn) in value terms by FY25. The share of private Source: Global Health DRHP, CRISIL Research
hospitals within this is expected to rise from ~58% in FY21 to 73% by FY25.
• Sustained demand, occupancy at near optimal level necessitates
expansion: Hospital revenues for covered companies achieved a 14% CAGR
over FY20-23, primarily led by a 9% ARPOB (Avg Revenue Per Occupied
Bed) CAGR driven by price hikes, payor mix and case mix, while IP (In
Patient) volume growth remained flat during the period. However, occupancy,
which had dipped to 58% during COVID in FY21, has sharply recovered to
~69% in FY23 for large players, which is a near-optimal level necessitating
expansion as demand trends continue to remain strong. Most players are
looking to add ~500-1,200 beds over the next two to three years, a large part
of which is brownfield and at existing locations, resulting in lower capex/bed.
• Profitability improved and likely to sustain; forecast 19% EBITDA
CAGR over FY23-26: Hospital segment EBITDA margin expanded by
~1,050bps to 24% over FY19-23 for our covered companies. With strong
profitability in existing business, faster breakeven timelines of brownfield
expansion and payor mix optimization, companies are in a better position to
absorb additional costs of expansion and to sustain profitability, in our view.
Moreover B/S and FCF generation remain very strong, providing funding
comfort. We forecast rev/EBITDA CAGRs of 15%/19% for our covered
companies, with ROCEs (ex-cash) to improve by ~600bps to 23% over FY23-
26E, which should support sector valuations. The hospital sector trades at ~21x
1yr fwd EV/EBITDA, which is 11% higher than the 10-yr historical avg.
See page 59 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
This document is being provided for the exclusive use of M ILAYARAJA at VIKRAM SARABHAI LIB IN INST
MGMT AHM.
Bansi Desai, CFA AC Asia Pacific Equity Research
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Table Of Contents
Initiate with OW on Apollo and Fortis, Neutral on Max
Healthcare and Medanta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indian Hospitals comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Valuation and performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
India Healthcare Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Structural shortages and uneven access to healthcare services. . . . . . . . 14
Structural demand factors drive strong growth visibility . . . . . . . . . . . . . . 16
Apollo Hospitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Max Healthcare. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Fortis Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Global Health. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
2
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Equity Ratings and Price Targets

Mkt Cap Price Rating Price Target
Company Ticker ($ mn) CCY Price Cur Prev Cur End Date Prev End Date
Apollo Hospitals APHS IN 8,742 INR 5,009.00 OW — 5,950.00 Sep-24 — —
Max Healthcare MAXHEALT IN 6,841 INR 583.40 N — 620.00 Sep-24 — —
Fortis Healthcare FORH IN 2,689 INR 293.45 OW — 355.00 Sep-24 — —
Global Health MEDANTA IN 2,059 INR 654.25 N — 710.00 Sep-24 — —
Source: Company data, Bloomberg Finance L.P., J.P. Morgan estimates. n/c = no change. All prices as of 14 Jun 23.
3
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Adj. EBITDA Estimate Changes

Rs in millions FY24E FY25E
Company BBG Ticker Prev Cur ∆ Prev Cur ∆
Apollo Hospitals APHS IN - 25,476 - - 31,111 -
Max Healthcare MAXHEALT IN - 18,562 - - 22,324 -
Fortis Healthcare FORH IN - 13,186 - - 15,058 -
Global Health MEDANTA IN - 7,352 - - 8,316 -
Source: Bloomberg Finance L.P., J.P. Morgan estimates.
4
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Initiate with OW on Apollo and Fortis,

Neutral on Max Healthcare and Medanta
Figure 1: Apollo Hospitals - Target Apollo Hospitals - Initiate at OW with PT of Rs5,950/sh (19% upside potential)
Multiple
Segment
Target EV • Apollo is the largest integrated healthcare company in India’s private sector with a
Multiple (x)
Hospitals (ex AHLL) 20
capacity of 8,534 beds which is 1.5x its nearest competitor. It has a pan-India
Pharmacy 25 footprint with presence across multiple formats – hospitals, AHLL (retail clinics),
AHLL (68.8% stake) 20
Digital Health 1* Apollo Healthco (pharmacy and 24/7 app) which is expected to unlock network
Source: J.P. Morgan estimates, based on Sep-25E synergies.
EBITDA estimates, * based on Sep-25E revenues for
Digital Health segment • Its hospital business (52% of revs) performance has been consistent and is expected
to see further improvement in margins based on occupancy increase and payor mix
improvement. Importantly, the healthco business (Pharmacy + Apollo 24/7 app)
which is currently incurring losses due to huge operating cost of Apollo 24/7 is
expected to achieve breakeven by FY25 (guided by Q4FY24) as operating costs start
reducing from 1HFY24. This along with strong growth in AHLL, should drive
EBITDA growth of 23% CAGR over FY23-26E, in our view.
• Our PT of Rs 5,950/sh is based on SOTP valuation of: a) hospitals and AHLL
business - 20x Sep-25E EV/EBITDA; b) Pharmacy – 25x Sep-25E EV/EBITDA; c)
Apollo 24/7 - 1x Sep-25E EV/revenues. Risks: continued elevated spends in 24/7,
slower ramp up in occupancies, lower margin expansion in hospitals, and adverse
government regulations.
Figure 2: Max Healthcare - Target Max Healthcare - Initiate at Neutral with PT of Rs620/sh (6% upside potential)
Multiple
Segment
Target EV • Max Healthcare is the second largest hospital in India in terms of revenues, with a
Multiple (x)
Hospitals + Max@Home 24
presence in the most premium markets of Delhi-NCR and Mumbai. It has best-in-
Max Lab 16 class operating metrics (highest EBITDA/bed, ARPOBs, occupancies) amongst the
Source: J.P. Morgan estimates, based on Sep-25E listed players. Under the leadership of Abhay Soi, Max has delivered significant
EBITDA estimates. improvement with revenues/EBITDA clocking 22%/63% CAGR in the last four
years and has one of the most efficient cost structures in the hospital space.
• Max has a well defined roadmap of expansion which drives strong growth visibility
over the next few years. It plans to add 2,700 beds over the next five years. This
includes brownfield expansion in the most attractive markets such as Delhi,
Gurugram, and Mumbai. The availability of valuable land bank at these locations
coupled with expansion at existing locations should result in lower capex per bed,
faster breakeven timelines and higher returns.
• We forecast revenue/EBITDA CAGR of 18%/18% over FY23-26E driven by
improvement in ARPOBs and capacity expansion. However at current market price,
valuations do not leave enough room for upside, in our view. Our PT is based on
SOTP valuation of: (a) hospitals - 24x Sep-25E EV/ EBITDA; (b) Max@Home
operations - 24x Sep-25E EV/EBITDA; (c) Max Lab operations - 16x Sep-25E EV/
EBITDA. Risks: Delay in capacity addition, higher losses from new expansion,
delay in payor mix improvement, change in management and adverse government
regulations.
5
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 3: Fortis Healthcare - Target

Multiple Fortis Healthcare - Initiate at OW with PT of Rs355/sh (21% upside potential)
Target EV
Segment
Hospitals
Multiple (x)
18
• Fortis Healthcare, owned by IHH (31% share), is the third largest pan India hospital
SRL (57% stake) 20 with capacity of 4,000 beds. Despite no expansion in the last few years, its hospital
Source: J.P. Morgan estimates, based on Sep-25E EBITDA doubled in the last three years as it focused on improving operations.
EBITDA estimates However, hospital margins at 18% remain below peers and have significant scope of
improvement. Its diagnostic business, SRL (57% stake), can potentially see value
unlock through IPO listing/sale to third party or Fortis raising funds to acquire the
remaining stake so as to give PE an exit by Feb 2024, as per contractual obligation.
• Despite ongoing legal issues, Fortis has started taking strategic decisions such as
acquisition of Medeor hospital, rebranding of SRL, and potential divestment of non
performing hospitals, which is positive in our view. Moreover, it further gives us
comfort on IHH’s intent and strategy of making Fortis its primary growth engine in
India.
• We forecast revenue/EBITDA CAGRs of 13%/17% over FY23-26E, driven by a
focus on profitable growth and bed expansion. Our PT of Rs 355/sh is based on
SOTP valuation of: a) hospital business - 18x Sep-25E EV/EBITDA; b) diagnostic
business – 20x Sep-25E EV/EBITDA. Risks: Inability to improve margins, delay in
bed expansion, change in IHH’s strategy, and adverse outcome on the ongoing legal/
regulatory issues.
Figure 4: Global Health - Target Multiple Global Health (Medanta) - Initiate at Neutral with PT of Rs710/sh (9% upside
Target EV potential)
Segment
Multiple (x)
Hospitals 20
• Founded by Dr. Naresh Trehan, a renowned cardiac surgeon, Global Health
(Medanta) is a leading tertiary and quaternary care healthcare provider well regarded
Source: J.P. Morgan estimates, based on Sep-25E for it hospital infrastructure and clinical talent. It operates five hospitals with bed
EBITDA estimates.
capacity of 2,697 beds spread across five cities, with its flagship hospital in
Gurugram.
• Its strategy of expanding beds in markets that are underserved is paying off well as
demonstrated in strong performance of newer units in Lucknow and Patna. These
assets have shown strong ramp up with Patna achieving break even in the first year
of operations, and Lucknow achieving EBITDA margins of ~30% (higher than
Gurugram). Medanta plans to add 800-1,300 beds over the next two years which
further drives growth visibility. We forecast 15% EBITDA CAGR over FY23-26E
driven by bed addition, ARPOB improvement and ramp up in occupancy at newer
units.
• Our PT of Rs 710/sh is based on 20x Sep-25E EV/EBITDA, set at a ~20% discount
to Max Healthcare given Medanta’s lower scale and higher concentration risk. Risks:
Higher revenue concentration from Gurugram asset (67% of revenues), key person
risk, and adverse regulatory actions.
6
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Indian Hospitals comparison
Table 1: Hospitals comparison of covered stocks

Hospitals Apollo Max^ Fortis Medanta Rainbow
Market Cap ($ mn) 8,737 6,869 2,696 2,136 1,163
No. of Hospitals 43 17 22 5 16
Capacity Beds (owned) 8,534[1] 3,500 4,032 2,697 1,655
Operational Beds (owned) 7,860 3,282 3,975 2,049 1,186
Dominant in North and
Key Presence Pan India Delhi NCR & Mumbai Pan India Dominant in Southern India
Central India
Specialty Mix Multi-specialty Multi-specialty Multi-specialty Multi-specialty Pediatric and women care
2000 beds in next 4 years in 1,400 beds over next 5 ~800-1300 beds in 2-3 years ~800 beds in next 3 years
~2,700 beds in the next 4
key metro cities (Delhi, years; Rs6-7bn capex in including Noida, ~770 beds (~50% in South, 50% in
Expansion plans years; Rs 37bn capex in 4
Mumbai, Chennai) with FY24 including Rs2.5bn for at existing locations; Gurugram) with capex
years
expected capex of Rs30bn acquisition Expected capex of Rs10bn spends of Rs 6-7bn
Pharmacy, AHLL (clinics/ Max@Home and Max Labs
Other businesses SRL - Diagnostics - -
diagnostics), Apollo 24/7 (Diagnostics)
Operating Parameters (FY23)
ARPOB (Rs/day) 51,668# 67,400 55,101 59,098 48,932
ALOS (days) 3.4 4.3 3.7 3.3 2.8
Occupancy 64% 76% 67% 59% 55%
Revenue per bed (Rs mn) 17.2 21.2 19.8 22.3 17.9
EBITDA per bed (Rs mn) 4.2 6.5 3.5 5.1 6
Gross block per bed& (Rs mn) 11 13.4 15.1 9.2 4.8
Financial Parameters (FY23)
Revenues (Rs mn) 166,125 58,750 62,976 26,942 11,736
Revenue CAGR (FY20-23) 14% 26% 11% 22% 18%
EBITDA Margin 12.3% 27.4% 17.5% 23.0% 33.8%
Net debt/EBITDA 1.7 -0.4 1.0 -0.2 -0.2
Revenue CAGR (FY23-26E) 15% 18% 13% 16% 19%
EBITDA CAGR (FY23-26E) 23% 19% 17% 16% 16%
36.4% Cash;
36 % Self Pay, 38%
42 % Cash, 42% Insurance; 7.9% International; 63% Cash; 24% Insurance;
Insurance; 48% Insurance;
Payor Mix 10% Institutional; 19% Institutional; 8% Institutional;
17% Institutional; 52% Cash
6% International 1.0% Pvt Corps; 6% International
8.5% International
35.4% Insurance
Valuation ratios (FY23)
P/B 11.7 6.7 3.2 7.1 8.9
EV per bed (Rs mn) 87 157 56 61 57
Hospital Segment (FY23)
Hospital as % of Revenues 52% 90% 81% 100% 100%
Hospitals revenue (Rs mn) 86,768 52,888 51,072 26,942 9,738
FY20-23 CAGR 15% 11% 11% 22% 18%
EBITDA (Rs mn) 21,331 16,175 9,219 6,198 3,964
FY20-23 CAGR 16% 15% 16% 16% 18%
EBITDA Margin 24.6% 30.6% 18.1% 23.0% 33.8%
ROCE (ex-cash) 14% 17% 9% 22% 25%
Source: Company reports, J.P. Morgan estimates, Priced as of Jun 14, 2023 ARPOB = Average Revenue per Occupied Bed, ALOS = Average Length of Stay, Net debt includes lease liabilities. ^Max nos
are on a memorandum consolidation basis. #Apollo’s ARPOB excludes doctor fees, hence actual value should be 20-25% higher than reported value , [1] Apollo’s Bed capacity as of Dec-2022.
7
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Valuation and performance

The sector is trading at a 18x FY25E EV/
EBITDA, ~30% premium to Asian peers We value covered companies based on sum-of-the-parts valuation, primarily using EV/
due to better revenue/EBITDA growth
EBITDA methodology for the hospitals business. The Indian hospitals sector is trading
prospects
at 18x/16x FY25/26E EV/EBITDA multiple which is a ~30% premium to Asian peers
as it offers better revenue/EBITDA growth prospects. The sector (ex Aster, ex Shalby) is
On a 12M forward basis, it is trading at a trading at one year rolling forward EV/EBITDA multiple of 20.8x which is an ~11%
20% premium to its five-year historical premium to its 10 year historical average given improved profitability, stronger B/S and
avg and an 11% premium to its 10 year
higher return ratios.
historical avg
Table 2: Indian Hospitals sector has significantly outperformed BSE Healthcare sector and Nifty
index
CMP Mcap Rating PT 1M 3M 1Y 3Y 5Y
(LC) $Mn Perf Perf Perf Perf Perf
Apollo Hospitals 5,009 8,775 OW 5,850 9% 16% 35% 257% 416%
Fortis Healthcare 293 2,699 N 355 8% 12% 27% 144% 115%
Max Healthcare 583 6,905 OW 320 17% 24% 65% - -
Global Health Ltd/India 654 2,138 OW 710 20% 32% - - -
Rainbow Hospitals 947 1,171 OW 1,010 11% 33% 116% - -
Narayana Hrudayalaya 986 2,456 NC - 30% 24% 54% 244% 332%
Healthcare Global 316 536 NC - 15% 19% 17% 162% 9%
KIMS Hospitals 1,608 1,568 NC - 8% 17% 34% - -
Aster DM 299 1,822 NC - 19% 30% 63% 198% 61%
Benchmarks
BSE Healthcare Index - - - - 6% 14% 13% 52% 75%
Nifty - - - - 2% 10% 19% 88% 74%
Source: Bloomberg Finance L.P. Note: Priced as of Jun 14, 2023.
Figure 5: Hospital sector valuations - 1 year forward EV/EBITDA

Average 12M forward EV/EBITDA
28.0
26.0
24.0
22.0
20.0
18.0
16.0
14.0
12.0
10.0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Sector EV/EBITDA LTA Avg + 1SD Avg - 1SD
Source: Bloomberg Finance L.P. estimates. Note: Priced as of Jun 14, 2023. LTA = 10 year average EV/EBITDA
8
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Table 3: Valuation - domestic and regional peers

CMP Mcap Rating PT P/E EV/EBITDA P/BV RoE
LC $Mn FY24E FY25E FY26E FY24E FY25E FY26E FY24E FY25E FY26E FY24E FY25E FY26E
Apollo Hospitals 5,009 8,776 OW 5,950 68.0 48.7 36.1 29.3 23.7 18.9 10.4 8.8 7.2 17.5 20.8 23.1
Fortis Healthcare 293 2,699 OW 355 33.0 27.7 22.6 17.4 15.0 12.4 3.0 2.8 2.5 10.1 11.0 12.0
Max Healthcare 583 6,906 N 620 43.1 35.5 29.2 30.4 25.1 20.7 5.9 5.1 4.3 14.7 15.4 16.0
Global Health Ltd/India 654 2,138 N 710 40.0 34.9 29.7 23.2 20.1 16.9 6.1 5.2 4.4 16.5 16.1 16.1
Rainbow Hospitals 947 1,171 OW 1,010 41.2 32.8 - 21.4 17.0 - 7.9 6.6 - 20.6 21.8 -
Narayana Hrudayalaya 986 2,456 NC - 32.5 28.8 24.6 18.8 16.6 14.4 7.4 5.9 5.1 24.8 21.8 24.2
Healthcare Global 316 536 NC - 54.5 33.3 13.7 13.5 11.5 - 4.6 4.0 2.8 9.4 12.6 -
KIMS Hospitals 1,608 1,568 NC - 33.6 29.1 24.7 18.8 15.8 13.1 6.2 5.1 - 19.9 17.2 16.8
Aster DM 299 1,822 NC - 22.9 18.3 13.6 8.9 7.2 6.4 2.9 2.4 - 12.5 13.8 6.6
India Avg (ex-Aster) 43.2 33.8 25.8 21.6 18.1 16.1 6.4 5.4 4.4 16.7 17.1 18.0
Raffles Medical 1 1,830 NC - 18.9 19.7 18.9 11.0 10.4 9.5 2.3 2.2 2.1 11.8 11.4 11.3
Bumrungrad Hospital 233 5,336 N 210 33.7 31.3 29.4 22.3 20.9 19.2 8.3 7.4 6.6 26.7 25.2 23.9
Bangkok Dusit 29 13,049 N 30 33.9 31.7 29.1 18.9 17.5 15.8 4.8 4.6 4.2 14.4 15.1 15.1
Bangkok Chain 18 1,315 NC - 29.5 24.7 22.7 14.6 12.7 11.6 3.5 3.3 3.1 11.6 12.8 14.2
Chularat Hospital 3 970 NC - 30.6 25.5 22.7 16.1 15.0 14.2 4.4 4.1 3.9 16.0 17.0 19.3
Mitra Keluarga Karyasehat 2,760 2,642 N 3,100 37.7 32.5 28.3 24.8 21.6 19.0 6.6 5.9 5.3 18.6 19.8 20.9
Siloam International Hosp 1,960 1,713 NC - 26.1 20.9 18.0 10.0 8.8 7.9 3.3 3.0 2.7 12.8 13.7 14.2
IHH Healthcare 6 11,052 OW 7 30.5 27.6 25.2 12.2 11.2 10.0 1.9 1.8 1.7 6.4 6.6 7.5
KPJ Healthcare 1 1,058 N 1 23.8 20.7 18.4 8.4 7.9 7.4 2.1 1.9 1.9 9.4 10.0 11.0
Asia Avg 29.4 26.1 23.6 15.4 14.0 12.8 4.1 3.8 3.5 14.2 14.6 15.2
Source: J.P. Morgan estimates, Bloomberg Finance L.P. Note: Priced as of Jun 14, 2023. FY24/25/26 estimates for Indian hospitals, CY23/24/26 estimates for Asia hospitals.
Table 4: JPMe vs Consensus

Revenues EBITDA
FY24E FY25E FY26E FY24E FY25E FY26E
Apollo Hospitals -2% -4% 0% -3% -5% -4%
Max Healthcare -3% 3% 3% -1% 1% 5%
Fortis 0% 1% 6% 0% -1% 6%
Medanta 2% 2% 8% 2% -2% -1%
Source: J.P. Morgan estimates, Bloomberg Finance L.P. estimates
9
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Executive Summary
The private sector accounts for ~69%
($49bn) of the annual spending on Demand-supply gap offers huge growth opportunity
hospitals
Indians spent ~$58bn on hospital expenses, of which the private sector accounted for
58% share in FY21. The structural demand drivers coupled with supply deficiencies
should continue to attract private investments in the space. Despite carrying 20% of the
global disease burden, it lags behind on health infrastructure on all key parameters such
as number of beds, doctors and nurses. Not only this, the quality of health services is
also not uniform across regions, which presents an opportunity for players to expand in
under-penetrated and underserved markets. While Metro and tier 1 cities have better bed
density than rural locations, they also have room to add capacities given the strong
demand from within the city and from neighboring states, in addition to catering for
international patients.
Companies have consolidated capacities Sustained demand, near optimal occupancy, strong B/S drives expansion need
and improved operating efficiencies in the
Companies in our covered universe are well-established hospital chains with a dominant
last few years
presence in the premium markets of North and South, offering tertiary and quaternary
care services. Over the last few years, companies were consolidating their bed capacities
We forecast Rev/EBITDA growth of while improving focus on cost efficiencies and payor mix (focus on cash/insurance
15%/19% over FY23-26 and average patients at the expense of government schemes), which drove improved profitability and
ROCE (ex-cash) of 23% in FY26
return ratios for the sector. While each of them have demonstrated strong revenue and
EBITDA growth, their profitability has varied based on location of their hospitals,
maturity mix, payor/case mix, and cost efficiencies. Sustained demand trends and strong
recovery post COVID have resulted in occupancy of 69% in FY23, which is a near-
optimal level, prompting companies to undertake expansion (largely brownfield) to fuel
the next leg of growth. Strong B/S and FCF can provide funding comfort while
supporting M&A aspirations. With strong trends in existing business, faster breakeven
timelines for brownfield expansion and scope to further improve margins on account of
payor mix and operating leverage, we believe companies are in better positions to
absorb initial losses from new expansion, which should help sustain profitability. We
forecast covered cos to achieve rev/EBITDA CAGRs of 15%/19% with ROCEs (ex-
cash) expansion of ~600bps to 23% over FY23-26E. We prefer Apollo and Fortis, in
that order, and have a Neutral view on Max Healthcare and Global Health (Medanta).
Table 5: Summarized views on covered companies

Apollo Hospitals Max Healthcare* Fortis Medanta
Market Cap ($mn) 8,773 6,915 2,699 2,137
Target EV/EBITDA (Sep 25E EBITDA) 20 24 18 20
Upside potential 19% 6% 21% 9%
EV/EBITDA (FY25/26) 23.7/18.9 25.1/20.7 15/12.4 20.1/16.9
Revenue (FY23-26 CAGR) 15% 18% 13% 16%
EBITDA (FY23-26 CAGR) 23% 19% 17% 16%
ROCE ex-cash (FY23) 14% 17% 9% 22%
Key investment argument Consistent performance of hospitals Best hospital asset to own. Aggressive Hospital business has improved but Provider of high end tertiary care with
which is its core business with room to expansion/payor mix adds margins have significant scope to good infrastructure, presence in
improve profitability. Breakeven of growth/margin visibility. Valuations improve compared to peers. Regulatory underserved market with good potential
healthco to pave way towards its although are not in comfort zone clearance will lift a key overhang. to grow. Valuations although are not
profitability. Valuations appear Valuations are below sector avg and its comforting
reasonable historical mean
Key monitorables Reduction in operating cost in 24/7 and Payor mix improvement - reduction in Regulatory clearance from SEBI and Sustained ramp up in Lucknow and
losses in Digital Health, Occupancy and institutional share, margin trends on Delhi High Court for IHH open offer, PE Patna, Progress on Indore and Noida
margin improvement in hospitals back of significant expansion, update on exit to SRL by Feb 2024, divestment of investments, any future announcements
M&A non performing assets in Fortis, on expansion
continued operational improvement in
hospitals
Source: Company reports, J.P. Morgan estimates. Note: *Max Healthcare numbers are on a memorandum consolidation basis and capital
employed excludes (a) impact of purchase price allocation at the time of merger with Radiant, (b) acquisition of ET Planner in Q2 FY22,
and (c) short-term FDRs. Priced as of Jun 14, 2023.
10
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Key trends in operating and financial parameters
Figure 6: Indian hospitals (covered universe) have seen healthy Figure 7: Importantly, profitability has improved significantly driven by
double-digit revenue growth over FY19-23 operating leverage and optimization of cost structure
25% 40%
21% 22% 34%
35% 31% 31%
20% 30% 27% 27%
25% 25%
25% 23% 23%
14% 21%
15% 19% 18% 18%
11% 20% 16% 15%
10% 14% 13%14%
15% 12%
10%
10% 8%
5% 5%
0%
0% Apollo Fortis Max Rainbow Medanta
Apollo Fortis Max Rainbow Medanta*
FY20 FY21 FY22 FY23
Source: Company reports. Note: Hospital segment revenue growth for FY19-23, *FY20-23 for Source: Company reports. Note: Hospital segment margins, Max Healthcare numbers are on a
Medanta, Max Healthcare numbers are on a memorandum consolidation basis memorandum consolidation basis
Figure 8: In this period, the bed capacity of large players has remained Figure 9: In-patient volumes have grown by 0-5% for large players and
stagnant, smaller players have expanded at double digits for smaller players owing to expansion
IP volume CAGR for FY19-23
FY19 FY20 FY21 FY22 FY23 20%
17%
18%
Apollo 8,683 8,822 8,816 8,538 8534* 16%
Fortis 3,691 3,652 3,743 3,931 4,032 13%
14%
Max^ 2,485 3,371 3,371 3,412 3,500 12%
10%
Rainbow 1,162 1,296 1,475 1,500 1,655
8%
Medanta 1,722 2,141 2,176 2,404 2,571 6% 5%
4%
2% 1%
0%
-2% 0%
Apollo Fortis Max Rainbow Medanta
Source: Company reports. Note: Includes managed assets; ^Max nos are not comparable for Source: Company reports.
FY19, *Apollo’s bed capacity as of Dec-2022
Figure 10: ALOS has been mixed - Apollo has seen the most Figure 11: ARPOB trends have been robust, driven by improvement in
improvement payor mix, case mix and price hikes
6.0 14%
5.2
4.7 12%
5.0 4.3 4.4 4.3 12% 11%
4.0 3.9 4.2 4.0 3.9 3.8 10%
4.0 3.4 3.4 3.2 3.6 3.7 3.7 3.5 10% 9%
3.3
3.0 2.7 2.8 2.6 2.7 2.8
8%
6%
2.0 6%
1.0 4%
0.0
0.0 2%
0%
FY19 FY20 FY21 FY22 FY23 Apollo Fortis Max Rainbow Medanta
Source: Company reports. Source: Company reports. Note: annualized ARPOB growth for FY19-23; * FY20-23 for Medanta.
11
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 12: Payor mix - Share of institutional biz is trending lower for Figure 13: Annual capex spends had slowed in the last few years,
Max; Apollo also commented on reducing institutional share expected to increase with expansion
annualized, Rs bn
25% 23% 12
22%
20% 10 10
19% 19% 10
20% 18% 17% 17%
8
8 7
15% 6
6
9% 9% 6
10% 8%
7%
4 3
5% 2 2 2
2 1 1
0% NA NA NA
Fortis Max Medanta 0
Apollo* Fortis Max** Rainbow Medanta
FY20 FY21 FY22 FY23
FY16-18 FY19-23 FY24-26E
Source: Company reports. Source: Company reports, J.P. Morgan estimates. Note: *excludes Rs 4.5bn acquisition cost in
FY23 for Apollo; **Max numbers are on a memorandum consolidation basis.
Table 6: Occupancy trends have improved sharply post the decline in COVID
FY18 FY19 FY20 FY21 FY22 FY23
Apollo 66% 68% 68% 55% 63% 64%
Fortis 70% 67% 68% 55% 63% 67%
Max 71% 74% 71% 65% 75% 76%
Rainbow 46% 43% 52% 33% 45% 55%
Medanta - - 55% 52% 61% 59%
Source: Company reports.
Figure 14: Net debt levels have reduced from historical levels Figure 15: Operating cash flow generation remains very strong,
Rs bn providing comfort on funding requirements
Rs bn
20 90
49 34 26 78
80
15 70
54 56
60
10 50 40
40 36
31
5 24
30 22
20 15 15 14
0 9
10 4 1 NA
0
-5
Apollo Fortis Max* Rainbow* Medanta
FY15 FY20 FY23 FY15-19 FY20-23 FY24-26E
Source: Company reports. Note: Max Healthcare numbers are on a memorandum consolidation Source: Company reports, J.P. Morgan estimates. Note: *FY15-19 includes only FY19 numbers for
basis. Max and Rainbow; Max Healthcare numbers are on a memorandum consolidation basis.
Figure 16: EBITDA growth has been strong and is likely to remain Figure 17: ROCEs (ex-cash) have improved and are likely to further
healthy at 19% CAGR over FY23-26E improve to 23% by FY26E
70.0% 63.1% 40.0%
60.0%
48.7% 30.0%
50.0% 46.4%
20.0%
40.0%
27.8%
30.0% 23.1% 10.0%
17.8% 17.1% 18.4% 17.9%
20.0% 15.5%
0.0%
10.0%
-10.0%
0.0% FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Apollo Fortis Max Rainbow Medanta*
CAGR (FY19-23) CAGR (FY23-26E)
Source: Company reports, J.P. Morgan forecasts. Note: *FY20-23 for Medanta, Max Healthcare Source: Company reports, J.P. Morgan forecasts. Note: Max Healthcare numbers are on a
numbers are on a memorandum consolidation basis memorandum consolidation basis
12
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
India Healthcare Opportunity

The hospital industry is forecast to grow
at a 15-17% CAGR to Rs7.7tn by FY25 • The hospitals industry accounts for ~61% of India’s healthcare market, of which the
with a share of 73% for private hospitals share of private hospitals is 58% as of FY21.
• Structural demand factors such as increasing burden of lifestyle diseases, rising
insurance penetration, rising affordability & awareness, increase in medical tourism
coupled with inadequate infrastructure present significant opportunities for private
players, in our view, given the government spend on healthcare remains low at
~1.6% of GDP.
• As per CRISIL estimates, the Indian hospitals industry will grow at a 15-17%
CAGR to reach Rs7.7tn by FY25 and the share of private hospitals within this is
expected to rise further to 73% by FY25.
Figure 18: India’s healthcare delivery market is expected to grow by Figure 19: Hospitals account for 61% of the current healthcare
15-17% CAGR till FY25 expenditure
Rs trillion FY2020
9.0 Medical devices
7.67tn 9%
8.0 Diagnostics
15-17% 10%
7.0 5.6
CAGR
6.0 5.0tn
5.0 11% 4.3tn
4.0 CAGR 3.5
3.0
3.0 2.5tn
2.0 1.6
Pharmacies
2.1 20% Hospitals
1.0 1.5 61%
1.3
0.0 0.9
FY16 FY21E FY22P FY25P
IPD OPD
Source: CRISIL Research, Global Health DRHP Source: CRISIL Research, Global Health DRHP
Figure 20: India’s healthcare spends as % of GDP remains low Figure 21: India lags significantly behind others on a per capita basis,
compared to global average too
% of GDP US$
20.0 6,000
Current Health Expenditure, % of GDP 11,700 Current Health Expenditure, per capita
18.0
16.0 5,000
14.0 4,000
12.0
10.0 3,000
8.0
6.0 2,000
4.0 1,000 57
2.0
0.0 0
USA UK Brazil South Korea Russia China Thailand Indonesia India USA UK South Korea Russia Brazil China Thailand Indonesia India
Source: Global Health Expenditure DB, WHO, as of 2020 Source: Global Health Expenditure DB, WHO, as of 2020
Share of government spends has risen but remains low

Government spends have risen since 2017 with increased capital expenditure under
schemes like the National Health Mission to upgrade existing healthcare facilities and
thrust on increasing insurance coverage under the Ayushman Bharat Scheme (2018) to
provide health cover of Rs0.5mn for 120mn poor families. Despite this, its current
allocation to healthcare remains low at 1.6% of GDP (as of FY21). The government
aims to increase this to 2.5% of GDP by FY25, which is still below global averages.
Given the low participation of government, quality healthcare typically falls into the
13
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
hands of private players.
Figure 22: Government spending on healthcare is extremely low... Figure 23: … leading to high out-of-pocket expenditure
as of 2020 FY20
12.0% 10.7% Others
10.0% Private insurance
5%
10.0% 8%
8.0%
6.0% 5.4% 5.1%

4.6% Out of
4.0% 3.1% 3.1% pocket
Government 52%
1.9%
2.0% 1.1% 35%
0.0%
USA UK Russia South Korea Brazil Thailand China Indonesia India
Source: Global Expenditure Database, WHO Source: National Health Account Estimates, 2019-20
Structural shortages and uneven access to healthcare

services
India’s bed density at 15 per 10,000 is
half of the global world median at 29 • India’s share of the global disease burden is high at 20%, but its share in health
infrastructure is much lower at low to mid single digits. It lags on all key parameters
- number of beds, doctors, nurses - compared to global averages. India’s bed density
is almost half of the world’s average at 15 compared to the global median of 29 beds
per 10,000 people, while the number of medical personnel is even worse at ~40% of
world average.
• Another important factor to consider is the uneven access to healthcare facilities. For
instance, 63% of the beds are in urban areas that cater to ~35% of the population,
whereas the balance of 37% caters to the larger rural population of 65%. Among
Tier I cities, Delhi/NCR has the lowest bed density compared to southern sates.
Among Tier II cities, Jaipur and Indore are well ahead of the rest but many cities in
the Northern and Eastern parts are under penetrated.
Figure 24: Hospital bed density is among the lowest Figure 25: Coverage for personnel is also low
per 10,000 population, 2020 or latest available, *median value per 10,000 population, 2020 or latest available, * average value as of 2018
80 140.0 124.7
Doctors Nurses
70 120.0
60 100.0 89.6
50 80.0
62.4
40 60.0
29 39.8 44.5
30 35.6 38.3 33.0
40.0 30.4
23.9 18.6
20 15 17.3
20.0 6.3 7.3
10
0.0
0 US UK Russia China Indonesia India World*
Russia China USA UK Brazil Indonesia India World*
Source: Global Health Observatory, WHO, CRISIL research. Source: Global Health Observatory, WHO
• The quality of healthcare offered at urban and rural locations also varies. While the
overall preference for private and public healthcare is roughly evenly split (slightly
higher preference for private in urban areas and vice versa in rural areas), the
wealthiest quintile strongly favors private healthcare. For the cohort not preferring
public healthcare, the top reasons include poor quality, long waiting times and lack
14
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
of a facility in the vicinity.

Figure 26: Number of hospitals - Urban & Rural Figure 27: Number of Beds - Urban & Rural
number
70,000 1,000,000
60,621
2019-20 2020-21 2019-20 2020-21 825,234 849,206
60,000
800,000
50,000
41,245
600,000 529,885 538,896
40,000 33,662
30,993
26,959
30,000 400,000 295,349 310,310
20,000
10,252 200,000
10,000
0 0
Rural Urban Total Rural Urban Total
Source: National Health Profile Source: National Health Profile
Figure 28: Bed density in Tier I cities
50
43
45
38
40 36
33
35 30
30
25
19
20
15
10
5
0
Delhi/NCR Pune MMR* Hyderabad Chennai Bengaluru
Source: CRISIL Research, Global Health DRHP. Note: *MMR is Mumbai Metropolitan Region
Figure 29: Some of the Tier II cities fare well Figure 30: But some cities are lagging, especially in the Northern and
Beds per 10,000 population Eastern parts
Beds per 10,000 population
60 54 25
22 22
50 20
43 43
17
40
32 33 15
30
30 25 27 11
10 8 8
20 7
10 5
0 0
Bhopal Chandigarh Vizag Lucknow Nellore Jaipur Patna Indore Ujjain Allahabad Bokaro Jamshedpur Kanpur Bhubaneshwar Ranchi
Source: CRISIL Research, Global Health DRHP Source: CRISIL Research, Global Health DRHP
15
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 31: Wealthy prefer private over public healthcare Figure 32: Public facilities suffer from poor quality and long waiting
% distribution of households by preferred source of healthcare and wealth distribution, times
2019-2021 Top reasons for not opting for public healthcare
Highest
120
Public health sector Private health sector Others
No govt facility in the vicinity
2.9 1.6 1.3 1.3 1.3
100
80 Long waiting time
60 43.4 43 43.4
48.5
Poor Quality of care
40 63.1
20 36% 38% 40% 42% 44% 46% 48% 50%
53.7 55.4 55.3 50.2 35.6

0
Lowest Second Mddle Fourth Highest
Source: National Family Health Survey - V Source: National Family Health Survey - V
Structural demand factors drive strong growth visibility

Rising incomes & urbanization
• India’s per capita income has increased steadily (barring the COVID blip) to nearly
$2,000. India’s urban population is expected to cross the $600mn mark in 2030,
which would be positive for our coverage companies given they largely operate in
the urban markets of India.
Figure 33: Income growing steadily barring a blip due to COVID Figure 34: Urban population expected to exceed 600 million by 2030
per capita income, constant 2015 US$ millions
2,500 650
607
1,891 1,942 1,937 600
2,000 1,796 1,796 543
1,701
1,590 550
1,405 1,490
1,500 1,285 1,337 483
500
450 429
1,000
400
500
350
0 300
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2015 2020 2025 2030
Source: World Bank Source: UN World Cities Report, 2022
Change in demographics
India’s elderly population is expected to
touch 200mn in 2030, making up 13% of • While much has been made of India’s favorable demographics and youth dividend
the population recently, the country’s demographics also indicate an impending demand surge in
healthcare needs given the elderly population is expected to touch 200mn in 2030,
making up 13% of the total population. India’s life expectancy has moved up
considerably since 1990 ( improvement of >10 years for both males and females)
and is expected to move up further, which also should drive higher demand for
healthcare.
16
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 35: Life expectancy has improved… Figure 36: … and is expected to move up further
median age, estimates beyond 2022
90.0
India Indonesia South Korea Thailand
Females 85.0
80.0
75.0
Males
70.0
40.0 45.0 50.0 55.0 60.0 65.0 70.0 75.0 65.0

2016 1990 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Source: India Health of the Nation States, 2017. Source: UN World Population Prospects 2022
Figure 37: India’s elderly population will touch ~200mn by the end of Figure 38: 60+ years cohort is gradually increasing
this decade % share of age groups, estimates beyond 2022
Millions, estimates beyond 2022
200 50%
60+ population 0-19 20-39 40-59 60+
175 40% 36%
33% 34% 33% 32%
150 30%
30% 24%
125 21% 22%
20%
100 13%
10% 11%
10%
75
50 0%
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2018 2023 2030
Source: UN World Population Prospects 2022 Source: UN World Population Prospects 2022
Increasing incidence of chronic diseases

Nearly 20% of the world’s diabetes
patients reside in India • The incidence of chronic or Non-Communicable Diseases (NCDs) has increased
dramatically in India in the last decade, with a 12 percentage point increase in the
share of Disability Adjusted Life Years (DALY). (The DALY metric captures the
impact of a ailment or injury by measuring the reduction in life expectancy and the
diminished quality of life. On an aggregate level, it captures the health burden of a
population.) On the other hand, the share of communicable diseases has reduced,
which is an expected outcome of higher economic growth leading to an
improvement in healthcare facilities and awareness. However, the current reduction
is not consistent with a boom in economic growth or a dramatic improvement in
healthcare in the last decade. It more likely indicates a faster-than-expected shift
towards lifestyle-related diseases. India is known as the diabetes capital of the world
with nearly 20% of the world’s diabetes patients residing in the country. On the
DALY metric, India trails the world average at 64%, which means the incidence can
increase further.
17
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 39: Chronic diseases are responsible for a higher share of Figure 40: ...but this is still below the world average indicating potential
deaths in India now... to increase
% share of Disability Adjusted Life Years (DALYs), India % share of Disability Adjusted Life Years (DALYs), World
70.0% 70.0%
Injuries CMNNDs NCDs Injuries CMNNDs NCDs 64
60.0% 58 60.0% 55
50.0% 46 50.0%
40.0% 40.0%
30.0% 30.0%
20.0%
20.0%
10.0%
10.0%
0.0%
0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: WHO Global burden of Diseases, 2019. Note: *CMNNDs - Communicable, Maternal, Source: WHO Global burden of Diseases, 2019. Note: *CMNNDs - Communicable, Maternal,
Neonatal and Nutritional Diseases, **NCDs - Non Communicable Diseases Neonatal and Nutritional Diseases, **NCDs - Non Communicable Diseases
• Within NCDs, cardiovascular diseases, respiratory ailments and cancer are the top
causes of death. The incidence of cardiovascular ailments and cancer has risen
significantly since 2000.
Figure 41: Within NCDs, cardiovascular and respiratory diseases have been the largest causes of
death
% share of total deaths due to NCDs, 2019
Others 4%
Diabetes 3%
Kidney 3%
Digestive 5%
Cancer 10%
Respiratory 12%
Cardiovascular 28%
0% 5% 10% 15% 20% 25% 30%
Source: WHO Global Health Observatory
Figure 42: Mortality share of Cardiovascular diseases and cancer has increased the most since 2000
% share of total deaths due to NCDs, 2000-2019
30%
2000 2010 2015 2018
25%
20%
15%
10%
5%
0%
Cardiovascular Respiratory Cancer Digestive Kidney Diabetes Others
Source: WHO Global Health Observatory
18
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Rising insurance penetration is the key for private players
• In India, share of out of pocket expenditure (OOPE) has been declining, but it still
remains very high at 52% compared to global peers. In the case of hospitalizations,
the average OOPE spend climbs to as much as 96% in rural India and is very
elevated in urban areas as well (~83%).
Private insurance covers only ~4% of the • ~37% of India’s population is currently covered by health insurance. Private
population currently insurance makes up for only 10% of the share (~3.7% of the population). As the
penetration of health insurance increases, quality healthcare should become more
affordable, which will drive growth for private players especially for tertiary/
quaternary care service providers.
Figure 43: Out-of-pocket expenditure (OOPE) is very high, although trending lower
% share of current health expenditure
Out of pocket Government Private insurance

60.0 55.1 53.2 52.0
50.0
40.0 33.2 34.5 35.3
30.0
20.0
6.6 7.3 7.7
10.0
0.0
2017-18 2018-19 2019-20
Source: National Health Estimates, 2019-20
Figure 44: Most countries fare better on (have lower) OOPE spends
OOPE as a % of Current Healthcare Expenditure
USA 10%
Thailand 11%
UK 13%
Russia 28%
Indonesia 31%
China 35%
Malaysia 36%
Sri Lanka 47%
India 51%
0% 10% 20% 30% 40% 50% 60%
Source: Global Expenditure Database, WHO
19
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 45: Average expenditure on hospitalization Figure 46: Average out-of-pocket expenditure on hospitalization
Rs Rs
50,000 Rural Urban Overall 35,000 32,047
Rural Urban
38,822 30,000 26,157
40,000
31,845 25,000 22,037
30,000 27,347 26,475
20,000 15,937
20,135
20,000 16,676 15,000
10,000
10,000 4,072 4,408
4,290 4,837 4,452 5,000
0 0
Public hospitals Private Hospitals All hospitals Public hospitals Private Hospitals All hospitals
Source: NSS Report 2017-2018 Source: NSS Report 2017-2018
Figure 47: Health premiums clocking in healthy growth Figure 48: Private insurance penetration is rising
Gross health insurance premiums, Rs billion LHS - mn, RHS - % share of private insurance based on number of lives
800 731 600 Total lives covered Pvt insurance penetration 12%
700 500 10%
582 10%
600 8%
508 400 8%
500 449
370 300 6%
400
304
300 200 4%
200
100 2%
100
0 0%
0
FY16 FY17 FY18 FY19 FY20 FY21 FY22
FY17 FY18 FY19 FY20 FY21 FY22
Source: IRDAI reports Source: IRDAI reports
Figure 49: 520 million lives covered which equals 37% of the population
No of lives covered by health insurance, millions
600
Total Government Group Individual
500
400
300
200
100
0
FY16 FY17 FY18 FY19 FY20 FY21 FY22
Source: IRDAI reports. Note: * represents segments of Government sponsored, Group and Individual insurance, respectively.
Medical tourism presents big opportunity

Cost of treatment in India is 80-90%
cheaper compared to the US and • India is a preferred destination for medical tourism in the region due to the
Singapore availability of quality services at affordable prices. It also featured in the top 10
destinations globally in a survey by the US Medical Tourism Association in 2021.
• The Indian government is targeting $12bn of medical tourism revenues by 2026 and
has launched many initiatives under the Heal in India programme to promote
Medical Value Travel (MVT). Some of them include the introduction of a new
category of ‘Medical visa’ (made available in 165 countries) and the launch of an
online MVT portal for international patients.
• The estimated cost of treatments in India is almost 1/5th-1/10th of western countries
(Table 7). India competes with Singapore, Thailand and Malaysia, which are also
;Iv
n
ru
icalp
d
m
ey
stfk
o
C
emerging medical tourism destinations. A large share of tourists come from the
20
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Middle East, Africa and Western Asia. Delhi and Chennai receive a large
proportiom (~60-70%) of the international patients.
• Medical tourism is recovering post the hiatus due to COVID with arrivals in 2022
almost back to pre-COVID levels. Revenues from the international patients segment
accounted for 10-11% of revenues pre COVID, which now stands at high single
digit of revenues and is expected to grow at a faster rate going forward.
Figure 50: Medical tourism arrivals are starting to recover

lakhs
8.00
Medical tourist arrivals 6.97
7.00 6.41 6.50
6.00
4.95
5.00 4.27
4.00
3.04
3.00 2.34
1.82
2.00 1.39
1.00
0.00
2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Ministry of Tourism, FICCI
Figure 51: Government targeting $12bn of medical tourism revenues in Figure 52: Most medical tourists are from neighboring Asian countries
2026 as of 2021
$bn
14
Medical tourism revenues
12
Others
10
Iraq 19%
8 5%
6 Afghanistan
6%
4 Bangladesh
Maldives 62%
2
8%
0
2020 2026F
Source: Global Wellness Institute Source: Bureau of Immigration
Table 7: Cost of key medical procedures in select countries; India offers treatment at very
competitive rates
US$
Ailments US Korea Singapore Thailand India
Hip replacement 50,000 14,120 12,000 7,879 7,000
Knee replacement 50,000 19,800 13,000 12,297 6,200
Heart bypass 144,000 28,900 18,500 15,121 5,200
Angioplasty 57,000 15,200 13,000 3,788 3,300
Heart valve replacement 170,000 43,500 12,500 21,212 5,500
Dental implant 2,800 4,200 1,500 3,636 1,000
Source: CRISIL Research, Global Health DRHP
21
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Government initiatives allow premium hospital chains to focus on cash/insurance

patients
Government spending to increase to Government spending has picked up in the last couple of years and the target is to
2.5% of GDP by 2025 increase it to 2.5% of GDP by 2025. The focus has been on upgrading existing
healthcare infrastructure, expansion of insurance coverage and strengthening preventive
measures (such as immunization). With a higher number of hospitals getting empaneled
with PM-JAY, the burden on large quality care players declines as they can focus on
increasing volumes from cash/insurance patients, which drives ARPOBs.
Some of the recent significant initiatives by the central government are:
National Health Mission: This programme aims to provide quality for the
economically weaker sections of the population by strengthening existing infrastructure
and healthcare delivery systems. The focus is more towards rural areas, primary
healthcare delivery and maternal & child health. The government is incurring sizeable
capital expenditures to create and upgrade new facilities under this scheme. This
programme has had the highest share (~50% in FY22) in the healthcare budget of the
central government in the last few years.
Figure 53: Government spending has picked up in the last couple of years
% of GDP, includes Centre and State government, * Revised estimates for FY22, Budget estimates for FY23
3.0%
2.5%
2.5%
2.2%
2.1%
2.0%
1.6%
1.4% 1.4% 1.4% 1.4%
1.5% 1.3%
1.0%
0.5%
0.0%
FY16 FY17 FY18 FY19 FY20 FY21 FY22* FY23* FY25E
Source: Union and State Budget documents
Ayushman Bharat: The government launched Ayushman Bharat in 2018 to provide

comprehensive healthcare service to the poorer sections of the society. The government
aims to:
• Transform the current sub centres and primary healthcare centres into
comprehensive primary health care centres.
• Provide annual health cover of Rs5 lakhs to over 120 million poor families (550
million beneficiaries) for secondary and tertiary care hospitalization.
22
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 54: Ayushman Bharat spending has lagged allocation

Rs bn
80.0
Budget allocation Revised Estimate Actual
70.0
60.0 64.0 64.0 64.0
50.0
40.0
30.0
32.0 32.0 31.0 32.0 31.2
20.0 26.8
10.0
0.0
FY20 FY21 FY22
Source: Ministry of Health & Family Welfare
The actual spending has lagged budgeted allocations since FY20 by about 50%. The
total beneficiaries enrolled stands at 220 million in 2022 and 41 million hospitalization
have been sponsored under the scheme. A total of 26k hospitals have been empaneled
until last year.
Figure 55: Ayushman Bharat - enrollments and hospitalizations Figure 56: Ayushman Bharat - Total hospitals empanelled
millions Number
250 30,000
219 2020 2021 2022 Total hospitals empanelled - private Total hospitals empanelled - public
25,000
200 14,225
159.2 12,828
20,000 13,531
150 125.8
15,000
100
10,000 11,806
10,478
40.70 8,858
50 5,000
12.00 18.30
0 0
Ayushman Cards Issued Total Hospitalizations 2020 2021 2022
Source: National Health Profile Source: National Health Profile
Other Insurance schemes: Apart from Ayushman Bharat, the government sponsors
treatment of central government employees and ex-defence personnel under the CGHS
and ECHS schemes, respectively. The government also launched digital initiatives like
e-Sanjeevni, a tele-medicine service for OPD consultations. The service was particularly
useful in the pandemic years and had recorded over 30mn consultations in early 2022.
Digital platforms offer significant growth potential

The e-Health market clocked Rs89 bn The e-Health market is comprised of e-Pharmacy players (medicines and OTC
GMV in 2020, with e-Pharmacy’s share at products), online diagnostics and tele-consultation. The GMV for the market increased
55%
to Rs89 billion in 2020 from Rs32bn in 2018 due to strong demand in the pandemic. e-
Pharmacy players had the largest share with 55% of the GMV, while tele-consultation
constituted the smallest slice of the pie at 4%. The e-Pharmacy market benefits
particularly from the entry of online players as they offer better pricing and convenience
for consumers due to better sourcing and efficient management. Despite the sharp
increase in 2020, the online penetration of e-Health was only at 2%. And within e-
Health, e-Pharmacy penetration was again very low at 2.3% compared to 10-15% in
China and 30-35% in the US.
23
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 57: Willingness to book tele-health visits increased post Figure 58: e-Health market GMV boomed due to the pandemic
pandemic Rs bn
%, survey results by age group
40% 37% 100
36% Pre-COVID Post-COVID e-Heath GMV 89
35% 90
31% 31%
80
30%
26% 70
24%
25% 60
20% 18% 50
15% 13% 13% 40 32

30
10% 8%
20
4% 4%
5% 10
0% 0
18-24 25-34 35-44 45-54 55-64 65-74 2018 2020
Source: EY Parthenon survey. Source: Redseer research.
Figure 59: e-Pharmacy market size Figure 60: e-Pharmacy: Market share split
% share of 2020 GMV share of 2019 revenues
e-Diagnostics e-Consultation Others
6% 4% 15%
Netmeds
12%
e-OTC PharmEasy*
35% e-Pharma
55% 55%
1mg
18%
Source: Redseer Research. Source: Analysys Mason. Note: *PharmEasy includes Medlife’s share.
Key Risks
• Execution risk: Delay in project completion, slower ramp-up of occupancy or

expansion, increased competition can impact growth and profitability.
• Price regulation on consumables: The central government has the power to
regulate prices for essential medicines. In 2017, the Ministry of Health notified an
inclusion of coronary stents and implants in the National List of Essential Medicines
and the National Pharmaceutical Pricing Authority capped retail prices pan India
due to alleged overcharging by certain hospitals. While hospitals have changed their
package prices to mitigate this impact, such headwinds could recur if price caps are
extended to consumables, diagnostics, etc.
• Unfavorable regulations: Hospitals also face risks from adverse government
regulations. Healthcare is a state subject in India, which means that there are
variations in laws and regulations across states. Some states (large ones include
Haryana, Uttar Pradesh, Telengana and Rajasthan) have adopted The Clinical
Establishments Act, 2010 (CEA, 2010), which lays down requirements on
infrastructure, manpower, equipment, record maintenance etc. which need to be
fulfilled by all health facilities. The 2012 CEA Rules lay down additional
regulations on pricing and standard treatment guidelines. Other states have their own
sets of rules and regulation.
24
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Initiation
Overweight Apollo Hospitals
APLH.NS, APHS IN
Price (14 Jun 23):Rs5,009.00
Shaping the healthcare ecosystem in India
Price Target (Sep-24):Rs5,950.00
Apollo is the largest integrated healthcare company in India’s private sector with a capacity
of 8,534 beds, which is 1.5x its nearest competitor. It has a pan-India footprint with presence
Pharmaceuticals & Healthcare across multiple formats – hospitals, AHLL (retail clinics) and Apollo Healthco (pharmacy
Services and 24/7 app), which is expected to unlock network synergies. We expect consistent and
Bansi Desai, CFA AC improving performance of hospitals, EBITDA breakeven of healthco (Pharmacy+Apollo
(91 22) 6157 3581 24/7) and strong growth in AHLL to drive a 23% EBITDA CAGR over FY23-26. Initiate
[email protected]
at OW with a PT of Rs5,950/sh.
J.P. Morgan India Private Limited, J.P. Morgan
Tower, Santacruz(E), Mumbai - 400098, SEBI
• Hospitals business – focus is on improving occupancy and margins, selective
expansion ahead: Apollo’s hospital revenues have achieved a 14% CAGR in the last
four years, largely driven by 11% ARPOB growth (price hikes, payor mix) and strong
Style Exposure IP volumes (+20%). Reduction in ALOS has driven strong IP volumes even as occupan-
cy remains below pre COVID level at 64%. EBITDA margins in this period improved
by ~670bps driven by operational efficiencies. Going forward, an increase in occupancy
(guided for 70% by end of FY24) and improvement in payor mix should further aid
margin expansion, in our view. We forecast ~100bps of expansion in next 2-3 years. In
addition, the company plans to add 2,000 beds selectively at metro locations with a
capex of Rs30bn over the next four years, which should also aid growth. Apollo’s hospi-
tal business accounted for 52% of revenues but ~104% of overall EBITDA in FY23. We
forecast its hospital rev/EBITDA to achieve 15%/17% CAGRs over FY23-26.
• Offline pharmacy business is expected to sustain growth momentum: Apollo’s
offline pharmacy business, the largest in India with ~5,500 stores, is likely to sustain its
growth momentum (11% CAGR over FY19-23) driven by store additions and maturing
of new stores. The EBITDA margins (post IndAS) of this business improved by ~40bps
over FY21-23 and we expect it to further improve by ~40bps to 8.3% over FY23-26,
driven by higher mix of private label sales and operating leverage over the next few
years.
• Apollo 24/7 - reduction in losses will be a key monitorable; potential to generate
significant value exists: Apollo 24/7, the digital health platform of Apollo, is expected
to enhance customer reach with its omni-channel presence and leverage to Apollo’s
physical network (hospitals, diagnostic labs, pharmacy stores, clinics) driving synergies
across formats. It is currently incurring annual operating cost of Rs6.5bn, resulting in
losses for the healthco entity (Pharmacy+Digital Health). While the operating costs are
expected to remain elevated until 1HFY24, gradual reduction post that combined with
higher revenues/margins from increasing GMVs should drive line of sight towards prof-
itability for the Healthco (breakeven by Q4FY24 as guided by mgmt) and digital health
platform (eventually) and create significant value for all its stakeholders, in our view.
• Initiate at Overweight with a price target of Rs5,950/sh: Our PT of Rs5,950/sh is
based on an SOTP valuation comprising: a) hospitals and AHLL business - 20x Sep 25E
EV/EBITDA; b) Pharmacy – 25x Sep 25E EV/EBITDA; c) 24/7 app - 1x Sep 25E EV/
revenues. Risks: continued losses in digital health, slower ramp-up in occupancies, and
adverse government regulations.
Sources for: Style Exposure – J.P. Morgan Quantitative and Derivatives Strategy; all other tables are company data and J.P. Morgan estimates.
25
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Price Performance Summary Investment Thesis and Valuation

Investment Thesis
Apollo is the largest integrated healthcare company in India’s
private sector with a capacity of 8,534 beds, which is 1.5x its
nearest competitor. It has a pan-India footprint with presence
across multiple formats – hospitals, AHLL (retail clinics) and
Apollo Healthco (pharmacy and 24/7 app), which is expected to
unlock network synergies. Its hospital business (52% of revs)
performance has been consistent and is expected to see further
improvement in margins based on occupancy and payor mix
improvement. Importantly, we expect the healthco business
YTD 1m 3m 12m (Pharmacy + Apollo 24/7 app), which is currently incurring
Abs 12.4% 8.8% 16.5% 35.2% losses due to the large operating cost of Apollo 24/7, to achieve
Rel 8.8% 6.4% 6.5% 15.9%
breakeven by Q4FY24 as the operating costs starts to reduce
Company Data from 2HFY24. This, along with strong growth in AHLL, should
Shares O/S (mn) 144 drive a 23% EBITDA CAGR over FY23-26E.
52-week range (Rs) 5,040.00-3,556.10
Market cap ($ mn) 8,742 Valuation
Exchange rate 82.38 We value our Indian hospitals coverage based on a sum-of-the-
Free float(%) 67.5%
3M - Avg daily vol (mn) 0.47 parts approach, primarily using EV/EBITDA methodology for
3M - Avg daily val ($ mn) 25.8 the hospitals business. Our PT of Rs5,950/sh for Apollo
Volatility (90 Day) 21 comprises the following SOTP components: a) hospitals and
Index NIFTY
BBG BUY|HOLD|SELL 25|0|1 AHLL business - 20x Sep 25E EV/EBITDA in line with sector
average multiple and ~20% lower than Max Healthcare given
Key Metrics (FYE Mar)
lower profitability and return ratios; b) Pharmacy – 25x Sep 25E
Rs in millions FY23A FY24E FY25E FY26E EV/EBITDA, set at a ~20% premium to the consensus multiple
Financial Estimates
Revenue 166,125 189,543 214,271 249,587 for Medplus (NC) given the bigger scale of operations and
Adj. EBITDA 20,496 25,476 31,111 38,504 higher profitability; c) Digital Health - 1x Sep 25E EV/revenues,
Adj. EBIT 14,344 18,523 23,323 29,877 which is at a ~30% discount to consensus multiples for regional
Adj. net income 8,191 10,594 14,796 20,127
Adj. EPS 56.97 73.69 102.91 139.99 digital healthcare peers like Ping An Healthcare &
BBG EPS 58.49 81.83 113.08 - Technologies, JD Health (NC).
Cashflow from operations 12,278 21,584 25,757 30,911
FCFF 82 13,584 16,757 18,911
Margins and Growth Performance Drivers
Revenue growth 13.3% 14.1% 13.0% 16.5%
Gross margin 48.4% 49.6% 50.9% 51.6%
EBITDA margin 12.3% 13.4% 14.5% 15.4%
EBIT margin 8.6% 9.8% 10.9% 12.0%
Adj. EPS growth (22.4%) 29.3% 39.7% 36.0%
Ratios
Adj. tax rate 22.4% 25.0% 25.0% 25.0%
Interest cover 5.4 5.9 8.3 12.2
Net debt/Equity 0.5 0.4 0.2 0.0
Net debt/EBITDA 1.7 1.1 0.5 0.1
ROCE 12.3% 14.5% 17.5% 20.6%
ROE 14.0% 16.3% 19.6% 22.2%
Valuation
FCFF yield 0.0% 1.9% 2.3% 2.6%
Dividend yield 0.5% 0.3% 0.3% 0.3%
EV/Revenue 4.6 4.0 3.5 2.9
EV/EBITDA 36.9 29.4 23.8 18.9
Adj. P/E 87.9 68.0 48.7 35.8
Source: J.P. Morgan Quantitative and Derivatives Strategy for Performance Drivers; company data, Bloomberg Finance L.P. and J.P. Morgan estimates for all other tables. Note: Price history may not be
complete or exact.
26
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Table 8: Forecast summary

Rs mn
REVENUES FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Healthcare Services 40,851 45,157 51,426 57,297 50,022 79,891 86,768 100,047 112,395 132,902
Health Co 27,852 32,689 38,860 48,206 48,760 53,610 67,045 75,948 86,055 97,897
Offline Pharmacy - - - - - - 59,951 67,145 75,203 84,227
Digital Health 7,094 8,803 10,852 13,670
AHLL 3,854 4,589 5,888 6,964 6,818 13,125 12,311 14,527 17,142 20,228
Consol Revenues 72,557 82,435 96,174 112,467 105,600 146,626 166,124 190,523 215,591 251,027
EBITDA FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Healthcare Services 7,122 7,598 9,204 10,750 6,925 18,032 21,331 25,194 28,509 34,034
Health Co 1,233 1,480 2,031 4,452 3,680 4,089 (2,017) (1,171) 802 2,245
Offline Pharmacy - - - - - - 4,742 5,439 6,167 6,991
Digital Health (6,759) (6,610) (5,364) (4,746)
AHLL (1,069) (1,146) (599) 671 768 1,966 1,182 1,453 1,800 2,225
Consol EBITDA 7,286 7,932 10,636 15,873 11,373 24,087 20,496 25,476 31,111 38,504
EBITDA Margin (%) FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Healthcare Services 17.4% 16.8% 17.9% 18.8% 13.8% 22.6% 24.6% 25.2% 25.4% 25.6%
Health Co 4.4% 4.5% 5.2% 9.2% 7.5% 7.6% -3.0% -1.5% 0.9% 2.3%
Offline Pharmacy - - - - - - 7.9% 8.1% 8.2% 8.3%
Digital Health -95.3% -75.1% -49.4% -34.7%
AHLL 10.0% -25.0% -10.2% 9.6% 11.3% 15.0% 9.6% 10.0% 10.5% 11.0%
Consol EBITDA margin 10.0% 9.6% 11.1% 14.1% 10.8% 16.4% 12.3% 13.4% 14.4% 15.3%
Source: Company reports, J.P. Morgan estimates. Note: *pre-IndAS EBITDA margins for Health Co & AHLL for FY19.
Table 9: Valuations summary - SOTP

EBITDA /Rev Target Multiple Total EV
Rs mn Rs MM
Hospitals (ex AHLL) 31,271 20 625,428
Pharmacy 6,579 25 164,468
AHLL (68.8% stake) 2,013 20 27,692
Digital Health* 12,261 1 12,261
Associate' stake 1,618
Total Enterprise Value 831,467
(-) Net Debt 9,991
Total Equity 821,476
Target Price 5,950
Source: J.P. Morgan estimates. Note: based on Sep-25E EBITDA estimates, *EV/Revenue multiple for Digital Health segment.
27
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 61: Income statement

Rs mn
Rs MM FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Net Revenues 96,174 112,468 105,600 146,626 166,125 189,543 214,271 249,587
% YoY 16.7% 16.9% -6.1% 38.9% 13.3% 14.1% 13.0% 16.5%
Manufacturing Expenses (46,609) (54,989) (56,842) (75,735) (85,742) (95,546) (105,218) (120,714)
Gross Profit 49,566 57,479 48,758 70,892 80,382 93,997 109,054 128,874
% of Revenues 51.5% 51.1% 46.2% 48.3% 48.4% 49.6% 50.9% 51.6%
Other Operating Expenses (38,929) (41,606) (37,384) (49,041) (59,886) (68,522) (77,943) (90,369)
EBITDA 10,637 15,873 11,374 21,851 20,496 25,476 31,111 38,504
EBITDA Margin (%) 11.1% 14.1% 10.8% 14.9% 12.3% 13.4% 14.5% 15.4%
Depreciation (3,955) (6,197) (5,731) (6,007) (6,152) (6,953) (7,788) (8,628)
EBIT 6,681 9,676 5,643 15,844 14,344 18,523 23,323 29,877
EBIT Margin (%) 6.9% 8.6% 5.3% 10.8% 8.6% 9.8% 10.9% 12.0%
Interest (3,270) (5,328) (4,492) (3,786) (3,808) (4,347) (3,747) (3,147)
Other Income 314 270 450 781 903 980 1,320 1,440
PBT 3,726 4,618 1,601 12,839 11,439 15,156 20,897 28,170
Tax (1,734) (2,252) (847) (4,770) (2,562) (3,789) (5,224) (7,042)
Tax Rate (%) 46.5% 48.8% 52.9% 37.2% 22.4% 25.0% 25.0% 25.0%
PAT before minorities/exceptionals 1,992 2,366 754 8,069 8,877 11,367 15,672 21,127
PAT Margin (%) 2.1% 2.1% 0.7% 5.5% 5.3% 6.0% 7.3% 8.5%
Minority Interest 359 231 136 (528) (255) (255) (255) (255)
Share in Associates 10 (31) 8 74 (432) (518) (621) (746)
Exceptionals 0 1,983 607 2,941 0 0 0 0
PAT 2,360 4,549 1,504 10,556 8,191 10,594 14,796 20,127
Net Margin (%) 2.5% 4.0% 1.4% 7.2% 4.9% 5.6% 6.9% 8.1%
Source: Company reports, J.P. Morgan estimates
28
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 62: Balance sheet

Rs mn
Shareholders Funds 33,334 33,391 46,026 56,233 60,578 69,159 81,798 99,769
Share Capital 696 696 719 719 719 719 719 719
Convertible share warrants 0 0 0 0 0 0 0 0
Reserves and Surplus 32,639 32,695 45,307 55,514 59,859 68,440 81,079 99,050
Non-current liabilities 37,588 55,313 45,766 49,314 45,612 39,019 32,432 25,852
Long-term borrowings 29,521 28,520 24,735 24,272 19,272 14,272 9,272 4,272
Lease Liabilities 18,676 12,300 13,333 14,983 13,333 11,683 10,033
Deferred Tax Liability 3,149 2,942 2,605 5,298 4,424 4,424 4,424 4,424
Other long-term liabilities 4,803 5,074 5,903 6,178 6,358 6,358 6,358 6,358
Long-term provisions 114 101 223 233 574 632 695 764
Current liabilities 19,555 23,373 20,378 23,833 32,551 34,320 37,155 41,161
Short-term borrowings 4,982 4,975 212 2,085 7,785 7,785 7,785 7,785
Current portion of long-term borrowings 2,210 2,461 3,647 0 0 0 0 0
Lease Liabilities 991 991 991 991 991
Trade Payables 7,132 9,089 11,599 16,318 19,116 20,772 23,482 27,352
Other current liabilities 4,209 5,618 3,827 3,250 3,530 3,530 3,530 3,530
Short-term provisions 1,022 1,230 1,092 1,189 1,130 1,243 1,367 1,503
TOTAL LIABILITIES & EQUITY 91,831 113,384 114,169 131,924 141,285 145,042 153,929 169,326
Goodwill on Consolidation 3,462 3,462 3,753 9,235 9,835 9,835 9,835 9,835
Non-current assets 65,554 83,454 74,001 81,473 91,028 92,075 93,287 96,660
Fixed Assets 54,572 72,610 66,093 73,867 81,376 82,423 83,636 87,008
Gross Block 61,765 72,926 75,186 87,750 94,250 102,250 111,250 123,250
Less: Depreciation 15,411 18,881 21,681 26,131 32,283 39,236 47,024 55,651
Net Block 46,354 54,044 53,505 61,619 61,967 63,014 64,226 67,599
CWIP 8,218 2,091 2,116 455 6,017 6,017 6,017 6,017
Right of use asset 16,474 9,836 10,730 12,330 12,330 12,330 12,330
Other intangible assets 636 1,063 1,063 1,063 1,063 1,063
Investments 3,930 4,198 3,724 2,830 2,856 2,856 2,856 2,856
Deferred Tax Asset 174 496 252 83 121 121 121 121
Long-term loans and advances/other fin. assets 2,459 2,568 1,620 1,293 3,052 3,052 3,052 3,052
Other non-current assets 4,419 3,582 2,313 3,400 3,624 3,624 3,624 3,624
Current Assets, Loans and Advances 22,816 26,469 36,414 41,216 40,422 43,133 50,807 62,831
Current investments 687 749 9,978 5,013 2,922 2,922 2,922 2,922
Inventories 5,848 7,378 2,495 4,319 3,869 5,193 5,870 6,838
Trade Receivables 10,232 10,272 13,312 17,676 22,302 23,368 26,417 30,771
Cash and Cash equivalents 2,862 3,807 4,252 5,830 354 673 4,621 11,324
Bank Balances 608 861 2,992 4,529 4,529 4,529 4,529 4,529
Short-term Loans & Advances 1,367 1,751 1,668 1,918 1,518 1,518 1,518 1,518
Other current assets 1,213 1,651 1,718 1,931 4,929 4,929 4,929 4,929
TOTAL ASSETS 91,831 113,384 114,169 131,924 141,285 145,042 153,929 169,326
29
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 63: Cash flow statement

Rs mn
PBT 2,002 4,312 1,368 11,084 11,439 15,156 20,897 28,170
Direct Taxes paid/ Refund (1,924) 3,061 353 (2,043) (2,562) (3,789) (5,224) (7,042)
Depreciation 3,955 6,197 5,731 6,007 6,152 6,953 7,788 8,628
Change in Working Capital (458) (703) (720) (6,396) (3,755) (622) (892) (1,315)
Other Non Cash Items 5,475 61 6,003 7,505 1,004 3,886 3,189 2,471
Cash Flows from operations 9,050 12,928 12,735 16,156 12,278 21,584 25,757 30,911
Capex (6,720) (5,106) (2,804) (6,518) (14,262) (8,000) (9,000) (12,000)

Change in Investments (1,036) 2,043 (11,485) (1,859) 2,066 0 0 0
Other Investing Activities 651 175 5,566 469 0 0 0 0
Cash flow from Investing (7,106) (2,888) (8,723) (7,908) (12,196) (8,000) (9,000) (12,000)
Change in Debt 2,347 (571) (8,985) (2,866) 700 (5,000) (5,000) (5,000)
Equity Issued 0 0 11,520 0 0 0 0 0
Dividends Paid (837) (1,551) (383) (433) (3,846) (2,013) (2,157) (2,157)
Interest Paid (3,620) (5,645) (4,677) (3,764) (3,808) (4,347) (3,747) (3,147)
Other (35) (1,328) (877) (614) 1,395 (1,905) (1,905) (1,905)
Cash Flow from Financing (2,145) (9,095) (3,401) (7,677) (5,559) (13,265) (12,808) (12,208)
Change in Cash (201) 945 611 572 (5,476) 320 3,948 6,703
Cash at Beginning of the Year 3,063 2,862 3,807 4,252 5,830 354 673 4,621
Cash at End of Year 2,862 3,807 4,252 5,830 354 673 4,621 11,324
Adjustments (165) 1,006
Cash as reported in Balance sheet 2,862 3,807 4,252 5,830 354 673 4,621 11,324
Figure 64: Key ratios

FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
ROA 2.2% 2.3% 0.7% 6.6% 6.5% 7.9% 10.5% 13.1%
ROCE 9.8% 12.2% 6.5% 17.3% 14.4% 17.9% 21.7% 25.7%
ROCE (net of cash) 10.4% 13.0% 7.4% 21.1% 16.4% 19.4% 23.9% 29.6%
ROE 6.0% 7.1% 1.9% 15.8% 15.2% 17.5% 20.8% 23.3%
Gross Debt 36,713 54,632 40,894 39,690 42,040 35,390 28,740 22,090
Net Debt 32,557 49,216 23,672 24,318 34,236 27,266 16,668 3,315
Net Debt to Equity 1.0 1.5 0.5 0.4 0.6 0.4 0.2 0.0
Net Debt to EBITDA 3.1 3.1 2.1 1.1 1.7 1.1 0.5 0.1
Payout ratio 35% 54% 51% 5% 43% 18% 14% 10%
Working capital to sales 9.3 7.6 4.0 3.9 4.2 4.1 4.1 4.1
Current Ratio 1.2 1.1 1.8 1.7 1.2 1.3 1.4 1.5
Receivable days 39 33 46 44 49 45 45 45
Inventory days 22 24 9 11 9 10 10 10
Payable days 27 29 40 41 42 40 40 40
Operating cycle 34 28 15 14 16 15 15 15
Interest Cover 3.3 3.0 2.5 5.8 5.4 5.9 8.3 12.2
30
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 65: Valuations - EV/EBITDA
35.0
30.0
25.0
20.0
15.0
10.0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
APHS LTA Avg +1SD Avg -1SD
Source: Bloomberg Finance L.P. Note: Based on 12M fwd Bloomberg consensus estimates, LTA = 10yr average EV EBITDA, Pricing as
of 14 Jun, 2023
31
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Investment Thesis, Valuation and Risks

Apollo Hospitals (Overweight; Price Target: Rs5,950.00)
Investment Thesis
Apollo is the largest integrated healthcare company in India’s private sector with a capacity
of 8,534 beds, which is 1.5x its nearest competitor. It has a pan-India footprint with presence
across multiple formats – hospitals, AHLL (retail clinics) and Apollo Healthco (pharmacy
and 24/7 app), which is expected to unlock network synergies. Its hospital business (52%
of revs) performance has been consistent and is expected to see further improvement in
margins based on occupancy and payor mix improvement. Importantly, we expect the
healthco business (Pharmacy + Apollo 24/7 app), which is currently incurring losses due to
the large operating cost of Apollo 24/7, to achieve breakeven by Q4FY24 as the operating
costs starts to reduce from 2HFY24. This, along with strong growth in AHLL, should drive
a 23% EBITDA CAGR over FY23-26E.
Valuation
We value our Indian hospitals coverage based on a sum-of-the-parts approach, primarily
using EV/EBITDA methodology for the hospitals business. Our PT of Rs5,950/sh for
Apollo comprises the following SOTP components: a) hospitals and AHLL business - 20x
Sep 25E EV/EBITDA in line with sector average multiple and ~20% lower than Max
Healthcare given lower profitability and return ratios; b) Pharmacy – 25x Sep 25E EV/
EBITDA, set at a ~20% premium to the consensus multiple for Medplus (NC) given the
bigger scale of operations and higher profitability; c) Digital Health - 1x Sep 25E EV/
revenues, which is at a ~30% discount to consensus multiples for regional digital healthcare
peers like Ping An Healthcare & Technologies, JD Health (NC).
Risks to Rating and Price Target
Downside risks to our rating and price target include continued losses in digital health,
slower ramp-up in occupancies, and adverse government regulations.
32
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Apollo Hospitals: Summary of Financials

Income Statement FY22A FY23A FY24E FY25E FY26E Cash Flow Statement FY22A FY23A FY24E FY25E FY26E
Revenue 146,626 166,125 189,543 214,271 249,587 Cash flow from operating activities 16,156 12,278 21,584 25,757 30,911
COGS (75,735) (85,742) (95,546)(105,218)(120,714) o/w Depreciation & amortization 6,007 6,152 6,953 7,788 8,628
Gross profit 70,892 80,382 93,997 109,054 128,874 o/w Changes in working capital (6,396) (3,755) (622) (892) (1,315)
SG&A - - - - -
Adj. EBITDA 21,851 20,496 25,476 31,111 38,504 Cash flow from investing activities (7,908) (12,196) (8,000) (9,000) (12,000)
D&A (6,007) (6,152) (6,953) (7,788) (8,628) o/w Capital expenditure (6,518) (14,262) (8,000) (9,000) (12,000)
Adj. EBIT 15,844 14,344 18,523 23,323 29,877 as % of sales 4.4% 8.6% 4.2% 4.2% 4.8%
Net Interest (3,786) (3,808) (4,347) (3,747) (3,147)
Adj. PBT 12,839 11,439 15,156 20,897 28,170 Cash flow from financing activities (7,677) (5,559) (13,265) (12,808) (12,208)
Tax (4,770) (2,562) (3,789) (5,224) (7,042) o/w Dividends paid (433) (3,846) (2,013) (2,157) (2,157)
Minority Interest (528) (255) (255) (255) (255) o/w Shares issued/(repurchased) 0 0 0 0 0
Adj. Net Income 10,556 8,191 10,594 14,796 20,127 o/w Net debt issued/(repaid) (2,866) 700 (5,000) (5,000) (5,000)
Reported EPS 73.42 56.97 73.69 102.91 139.99 Net change in cash 572 (5,476) 320 3,948 6,703
Adj. EPS 73.42 56.97 73.69 102.91 139.99
Adj. Free cash flow to firm 8,249 82 13,584 16,757 18,911
DPS 3.00 26.75 14.00 15.00 15.00 y/y Growth 105.6% (99.0%)16376.3% 23.4% 12.9%
Payout ratio 4.1% 47.0% 19.0% 14.6% 10.7%
Shares outstanding 144 144 144 144 144
Balance Sheet FY22A FY23A FY24E FY25E FY26E Ratio Analysis FY22A FY23A FY24E FY25E FY26E
Cash and cash equivalents 5,830 354 673 4,621 11,324 Gross margin 48.3% 48.4% 49.6% 50.9% 51.6%
Accounts receivable 17,676 22,302 23,368 26,417 30,771 EBITDA margin 14.9% 12.3% 13.4% 14.5% 15.4%
Inventories 4,319 3,869 5,193 5,870 6,838 EBIT margin 10.8% 8.6% 9.8% 10.9% 12.0%
Other current assets 25,844 32,617 35,008 38,735 44,056 Net profit margin 7.2% 4.9% 5.6% 6.9% 8.1%
Current assets 41,216 40,422 43,133 50,807 62,831
PP&E 73,867 81,376 82,423 83,636 87,008 ROE 20.6% 14.0% 16.3% 19.6% 22.2%
LT investments 2,830 2,856 2,856 2,856 2,856 ROA 8.6% 6.0% 7.4% 9.9% 12.5%
Other non current assets 7,606 9,651 9,651 9,651 9,651 ROCE 12.4% 12.3% 14.5% 17.5% 20.6%
Total assets 131,924 141,285 145,042 153,929 169,326 SG&A/Sales - - - - -
Net debt/Equity 0.4 0.5 0.4 0.2 0.0
Short term borrowings 2,085 7,785 7,785 7,785 7,785 Net debt/EBITDA 1.1 1.7 1.1 0.5 0.1
Payables 16,318 19,116 20,772 23,482 27,352
Other short term liabilities 5,430 5,651 5,764 5,888 6,024 Sales/Assets (x) 1.2 1.2 1.3 1.4 1.5
Current liabilities 23,833 32,551 34,320 37,155 41,161 Assets/Equity (x) 2.4 2.3 2.2 2.0 1.8
Long-term debt 24,272 19,272 14,272 9,272 4,272 Interest cover (x) 5.8 5.4 5.9 8.3 12.2
Other long term liabilities 49,314 45,612 39,019 32,432 25,852 Operating leverage 465.3% (71.2%) 206.7% 198.7% 170.5%
Total liabilities 73,147 78,163 73,339 69,587 67,013 Tax rate 37.2% 22.4% 25.0% 25.0% 25.0%
Shareholders' equity 56,233 60,578 69,159 81,798 99,769 Revenue y/y Growth 38.9% 13.3% 14.1% 13.0% 16.5%
Minority interests 2,544 2,544 2,544 2,544 2,544 EBITDA y/y Growth 92.1% (6.2%) 24.3% 22.1% 23.8%
Total liabilities & equity 131,924 141,285 145,042 153,929 169,326 EPS y/y Growth 583.6% (22.4%) 29.3% 39.7% 36.0%
Valuation FY22A FY23A FY24E FY25E FY26E
BVPS 391.11 421.35 481.03 568.95 693.94
P/E (x) 68.2 87.9 68.0 48.7 35.8
y/y Growth 19.0% 7.7% 14.2% 18.3% 22.0%
P/BV (x) 12.8 11.9 10.4 8.8 7.2
EV/EBITDA (x) 34.2 36.9 29.4 23.8 18.9
Net debt/(cash) 24,318 34,236 27,266 16,668 3,315
Dividend Yield 0.1% 0.5% 0.3% 0.3% 0.3%
Source: Company reports and J.P. Morgan estimates.
Note: Rs in millions (except per-share data).Fiscal year ends Mar. o/w - out of which
33
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Initiation Max Healthcare

Neutral
MAXE.NS, MAXHEALT IN Brownfield expansion in metros drives higher occupancy
Price (14 Jun 23):Rs583.40
certainty
Price Target (Sep-24):Rs620.00
Max Healthcare is the second-largest hospital in India in terms of revenues with a presence
in the most premium markets of Delhi-NCR and Mumbai. It has best-in-class operating
Pharmaceuticals & Healthcare metrics (highest EBITDA/bed, ARPOBs, occupancies) among the listed players. Under the
Services management of Abhay Soi, Max has delivered remarkable improvement with Rev/EBITDA
Bansi Desai, CFA AC clocking 22%/63% CAGRs in the last four years. It has one of the most efficient cost struc-
(91 22) 6157 3581 tures in the hospital space with an EBITDA margin of 27%. However, at current market price
[email protected]
of Rs575, the stock trades at ~25/21x EV/EBITDA on our FY25/26 estimates, leaving limit-
J.P. Morgan India Private Limited, J.P. Morgan ed room for upside. Initiate at Neutral with a PT of Rs620/sh.
• Well-defined roadmap for expansion: Max plans to add 2,700 beds over the next four
years, which represents ~75% addition on its current capacity. This includes brownfield
Style Exposure expansion in the most attractive markets such as Delhi, Gurugram, and Mumbai. The
availability of valuable land bank at these locations coupled with brownfield expansion
should result in lower capex per bed, faster breakeven timelines and higher returns.
• Margin levers in place to absorb initial losses from expansion: Max has one of the
highest EBITDA margins in the industry at ~27%. While new beds are likely to add
operating costs, the drag on margins is likely to be limited given new units are achieving
breakeven faster (Max Shalimar Bagh reported positive EBITDA in its first month of
operation), existing units continue to drive operating leverage and scope to further
improve payor mix exists. It has plans to reduce revenue share of institutional business
from 29% to 15% in 1-2 years, but this may get delayed as they are in the midst of negoti-
ating prices with government for CGHS (scheme) patients where partial items have been
revised upwards and further revisions in packages are awaited. We forecast an EBITDA
CAGR of 18% over FY23-26E, driven by improvement in ARPOBs and ~800 bed addi-
tion in FY24-25.
• Robust B/S and FCF generation ensures funding comfort: We expect Max to gener-
ate OCF of Rs56bn over the next three years, which should comfortably fund its expan-
sion needs (Rs37bn) and allow it to explore M&A opportunities that can give access to
newer markets with proven viability. Its ROCE (ex-cash) remains attractive at ~17% and
is likely to improve by 570bps to ~23% in FY26.
• Initiate at Neutral with a PT of Rs620/sh: Our PT is based on a SOTP valuation com-
prising: (a) hospitals - 24x FY25E EV/ EBITDA; (b) Max@Home operations - 24x
FY25E EV/EBITDA; and (c) Max Lab operations - 16x FY25E EV/EBITDA. Risks:
delay in capacity addition, higher losses from new expansion, delay in payor mix
improvement, and adverse government regulations.
34
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Investment Thesis
Max Healthcare is the second largest hospital in India in terms
of revenues with a presence in the most premium markets of
Delhi-NCR and Mumbai. It has best-in-class operating metrics
(highest EBITDA/bed, ARPOBs, occupancies) amongst the
listed players. Under the management of Abhay Soi, Max has
delivered remarkable improvement with rev/EBITDA clocking
22%/62% CAGRs in the last four years. It has one of the most
efficient cost structures in the hospital space, in our view. Max
has a well-defined roadmap of expansion that drives strong
YTD 1m 3m 12m growth visibility over the next few years. It plans to add 2,700
Abs 30.3% 16.7% 24.5% 65.1% beds over the next five years. This includes brownfield
Rel 26.7% 14.3% 14.4% 45.8%
expansion in the most attractive markets such as Delhi,
Company Data Gurugram and Mumbai. The availability of valuable land bank
Shares O/S (mn) 966 at these locations coupled with expansion at existing locations
52-week range (Rs) 584.90-306.00 should result in lower capex per bed, faster breakeven timelines
Market cap ($ mn) 6,841
Exchange rate 82.38 and higher returns. However, at current price levels, we see
Free float(%) 59.6% limited room for upside and therefore initiate at Neutral.
3M - Avg daily vol (mn) 5.57
3M - Avg daily val ($ mn) 34.9 Valuation
Volatility (90 Day) 30 We value Max Healthcare based on a sum-of-the-parts
Index NIFTY
BBG BUY|HOLD|SELL 10|0|1 valuation, primarily using EV/EBITDA methodology for the
hospitals business. Our SOTP valuation comprises: (a) hospitals
- 24x FY25e EV/ EBITDA (~20% premium to sector average
Rs in millions FY23A FY24E FY25E FY26E multiple given its best in class operating metrics); (b) Max Lab
Financial Estimates
Revenue 58,750 66,293 80,885 97,335 operations - 16x FY25e EV/EBITDA, ~20% discount to avg
Adj. EBITDA 16,070 18,562 22,324 26,670 consensus multiple of large peers like Metropolis (NC) / Dr. Lal
Adj. EBIT 13,470 15,434 18,668 22,653 Pathlabs (NC) given its lower scale and profitability.
Adj. net income 13,290 13,077 15,854 19,271
Adj. EPS 13.76 13.54 16.41 19.95
BBG EPS 12.38 13.55 15.84 -
FCFF 9,000 5,706 7,791 14,890
Margins and Growth
Revenue growth 13.6% 12.8% 22.0% 20.3%
Gross margin 54.5% 54.8% 54.6% 54.5%
EBITDA margin 27.4% 28.0% 27.6% 27.4%
EBIT margin 22.9% 23.3% 23.1% 23.3%
Adj. EPS growth 51.0% (1.6%) 21.2% 21.6%
Ratios
Adj. tax rate 2.3% 15.0% 15.0% 15.0%
Interest cover 41.2 50.5 60.8 72.6
Net debt/Equity NM NM NM NM
Net debt/EBITDA NM NM NM NM
ROCE 15.6% 13.5% 14.2% 15.0%
ROE 17.8% 14.7% 15.4% 16.0%
Valuation
FCFF yield 1.6% 1.0% 1.4% 2.6%
Dividend yield - - - -
EV/Revenue 9.5 8.3 6.7 5.4
EV/EBITDA 34.6 29.7 24.4 19.9
Adj. P/E 42.4 43.1 35.5 29.2
complete or exact.
35
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Rs mn
REVENUES FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Hospitals + Max Home 35,747 39,821 35,614 51,141 54,068 64,926 79,272 95,431
Max Lab 243 409 676 1,039 1,159 1,367 1,613 1,904
Consol Revenues 35,990 40,230 36,290 52,180 59,040 66,293 80,885 97,335
EBITDA FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Hospitals + Max Home 2,275 4,217 6,024 13,427 16,097 18,453 22,187 26,498
Max Lab (5) (47) 67 13 (27) 109 137 171
Consol EBITDA 2,270 4,170 6,090 13,440 16,070 18,562 22,324 26,670
EBITDA Margin (%) FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Hospitals + Max Home 6.4% 10.6% 16.9% 26.3% 29.8% 28.4% 28.0% 27.8%
Max Lab -2.0% -11.5% 9.8% 1.2% -2.3% 8.0% 8.5% 9.0%
Consol EBITDA margin 8.6% 14.2% 16.9% 26.0% 27.4% 28.0% 27.6% 27.4%
Table 11: Valuation summary - SOTP

Particulars EBITDA Multiple INR mn
Hospitals + Max@Home 24,343 24.0 584,226
Max Lab 154 16.0 2,468
Fair value of Max's operating assets 586,694
Enterprise Value 586,694
Less: Net Debt (10,921)
Implied Market Cap 597,616
No. of Equity shares 971
Target Price 620
Source: J.P. Morgan estimates. Note: based on Sep-25E EBITDA
Max Healthcare Institute Ltd (MHIL) group has long-term contracts with certain
societies that own and operate hospitals and act in concert with other Max hospitals.
Given MHIL has significant financial exposure and controls medical operations of these
hospitals, they are treated as Partner Healthcare Facilities (PHF) and form part of
Max’s network of hospitals.
The financials below represent memorandum consolidation of network hospitals, which

includes MHIL group (Max Healthcare Institute Limited) and PHFs (Partner
Healthcare Facilities). The historical information for network P&L and B/S is provided
by the company, whereas cashflows are based on our assumptions.
36
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Rs mn
Revenue from operations 26,526 29,321 36,010 51,710 58,750 66,293 80,885 97,335
% YoY 11% 23% 44% 14% 13% 22% 20%
Purchase of medical consumables, drugs and surgical 6,136 6,784 9,730 13,500 13,920 15,579 19,008 22,874
Professional fees to doctors 6,584 7,026 5,664 10,794 12,838 14,386 17,714 21,414
Gross Profit 13,806 15,510 20,616 27,416 31,992 36,329 44,163 53,047
% Gross margin 52.0% 52.9% 57.3% 53.0% 54.5% 54.8% 54.6% 54.5%
Employee benefit expenses 6,427 6,638 9,500 11,020 12,070 13,457 16,501 19,954
Other expenses 5,110 4,702 5,026 2,956 3,852 4,309 5,338 6,424
Post-INDAS EBITDA 2,270 4,170 6,090 13,440 16,070 18,562 22,324 26,670
% EBITDA margin 8.6% 14.2% 16.9% 26.0% 27.4% 28.0% 27.6% 27.4%
Depreciation and amortization 1,406 1,627 2,160 2,480 2,600 3,128 3,656 4,016
EBIT 864 2,543 3,930 10,960 13,470 15,434 18,668 22,653
% EBIT margin 3% 9% 11% 21% 23% 23% 23% 23%
Net interest expense/(income)
Interest income 60 603 0 0 0 0 0 0
Finance costs 1,298 2,305 1,870 1,120 390 367 367 367
Exceptional items 0 0 2,770 500 380 0 0 0
Other income 112 273 280 470 290 319 351 386
Pretax profit -263 1,113 -430 9,810 12,990 15,385 18,651 22,672
Total tax expense 123 -28 500 1,430 -300 2,308 2,798 3,401
% tax rate 47% 3% 116% 15% 2% 15% 15% 15%
Profit after tax -385 1,141 -930 8,380 13,290 13,077 15,854 19,271
Equity accounted investees 0 0 -231 0 0 0 0 0
(-) Minority interest 28 0 0 0 0 0 0 0
Restated net profit after tax for basic EPS -414 1,141 -1,161 8,380 13,290 13,077 15,854 19,271
% PAT Margin -2% 4% -3% 16% 23% 20% 20% 20%
Net extraordinary items 0 0 1,636 0 0 0 0 0
Recurring net profit -414 1,141 475 8,380 13,290 13,077 15,854 19,271
% margin -2% 4% 1% 16% 23% 20% 20% 20%
Source: Company reports, J.P. Morgan estimates.

Rs mn
Share Holder's Equity 30,426 33,860 57,381 67,180 82,179 95,256 111,110 130,381
Gross Debt 20,680 19,260 11,280 9,180 6,820 6,820 6,820 5,820
Deferred/Contingent Consideration Payable 2,560 2,470 4,280 4,250 4,400 4,400 4,400 4,400
Put Option Liability 5,860 820 1,390 1,500 800 800 800
Lease Liabilities 0 2,440 1,980 2,020 1,390 1,390 1,390 1,390
Deferred Tax Liability/(Deferred Tax Asset) 0 0 1,580 1,850 0 0 0
Others 4,042 2,702 5,550 7,888 7,888 7,888 7,888
Total Liabilities 57,708 66,592 82,871 85,870 104,177 116,554 132,408 150,679
Goodwill 7680 7,680 37,730 37,730 37,730 37,730 37,730 37,730

Net Tangible Assets (incl. CWIP) 18930 20140 25320 32270 34580 42,033 49,757 53,622
Net intangibles 7150 6990 6580 6880 6810 6,429 6,048 5,667
Right to use assets 1,580 2,420 2,350 2,030 2,030 2,030 2,030
Cash & Bank Balance 3240 4,110 6,660 6,150 15,650 19,976 27,087 40,297
Trade Receivables (net) 3358 3,752 3,401 4,900 4,337 4,904 5,983 7,200
Inventories 860 940 740 830 1,040 1,453 1,773 2,133
Investments 15750 21,380 20 20 1,500 1,500 1,500 1,500
Net Current & Non-Current Assets/(Liabilities) 740 20 -5,260 500 500 500 500
Total Assets 57,708 66,592 82,871 85,870 104,177 116,554 132,408 150,679
37
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Rs mn
PBT -418.6 1258 -441 9,799 12,977 15,385 18,651 22,672
D&A 1856.2 2077 2,161 2,484 2,605 3,128 3,656 4,016
Finance cost 1552.7 2147 1,875 1118 392 367 367 367
Other income -268.5 -324 (277) -472 -331 0 0 0
Others 2054.1 1705 2768 502 -1034 0 0
Operating cashflow 4,776 6,863 6,086 13,431 14,609 18,881 22,675 27,056
Working capital -481.3 -474 551 -1573 337 -980 -1,399 -1,577
Tax -281.3 33 -499 -1432 -2135 -2,308 -2,798 -3,401
Net cash flow from operations 4,013 6,422 6,138 10,426 12,811 15,593 18,478 22,078
Capex -3656.3 -4707 -7771 -9664 -4192 -10,200 -11,000 -7,500

Acquisitions 0 0 -30050 0 -610 0 0 0
Others -2632 -4586 18889 -30 -1641 0 0 0
Net cash flow from investing -6,288 -9,293 -18,932 -9,694 -6,443 -10,200 -11,000 -7,500
Issue of shares/proceeds from exercise of share options 0 0 4287 -63 13 0 0 0

Change in Debt -1260 -1420 -7990 -2100 -2360 0 0 -1,000
Change in lease liabilities -250 -460 -290 -630 -700 0 0
Interest and other borrowing costs -961.8 -2147 -1875 -1118 -392 -367 -367 -367
Dividends paid including dividend tax 0 0 0 0 0 0 0 0
Others -650 4431 1199 503 1054 0 0 0
Net cash flow from financing -2,872 614 -4,839 -3,068 -2,315 -1,067 -367 -1,367
Change in cash -5,147 -2,257 -17,633 -2,336 4,053 4,326 7,111 13,210
Opening cash 8387 3240 4110 6660 6150 15,650 19,976 27,087
Adjustments 0 3128 20183 1827 5447 0 0 0
Cash as reported on Balance sheet 3,240 4,111 6,660 6,151 15650 19,976 27,087 40,297

ROA -0.7% 1.8% -1.6% 9.9% 14.0% 11.8% 12.7% 13.6%
ROCE 1.6% 4.3% 5.6% 13.7% 14.9% 15.1% 16.0% 16.9%
ROCE (net of cash) 1.7% 4.6% 6.1% 14.9% 17.0% 18.2% 20.1% 22.7%
ROE -2.5% 3.6% -2.0% 13.5% 17.8% 14.7% 15.4% 16.0%
Gross Debt 23,240 30,030 18,360 16,840 14,110 13,410 13,410 12,410
Net Debt 20,000 25,920 11,700 10,690 -1,540 -6,566 -13,677 -27,887
Net Debt to Equity 0.66 0.77 0.20 0.16 -0.02 -0.07 -0.12 -0.21
Net Debt to EBITDA 8.8 6.2 1.9 0.8 -0.1 -0.4 -0.6 -1.0
Payout ratio 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Receivable days 46 47 34 35 27 27 27 27
Inventory days 12 12 8 6 6 8 8 8
Interest Cover 0.67 1.10 2.10 9.79 34.54 42.00 50.80 61.65
FCF 357 1,715 -1,633 762 8,619 5,393 7,478 14,578
38
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 70: Valuations - EV/EBITDA chart
32
30
28
26
24
22
20
18
16
Mar-21 Jul-21 Nov-21 Mar-22 Jul-22 Nov-22 Mar-23
MAXHEALT LTA Avg +1SD Avg -1SD
Source: Bloomberg Finance L.P. Note: Based on 12M fwd Bloomberg consensus estimates, LTA = Average EV/EBITDA since 15 Mar
2021, pricing as of 14 Jun, 2023
39
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Max Healthcare (Neutral; Price Target: Rs620.00)
Investment Thesis
Max Healthcare is the second largest hospital in India in terms of revenues with a presence
in the most premium markets of Delhi-NCR and Mumbai. It has best-in-class operating
metrics (highest EBITDA/bed, ARPOBs, occupancies) amongst the listed players. Under
the management of Abhay Soi, Max has delivered remarkable improvement with rev/
EBITDA clocking 22%/62% CAGRs in the last four years. It has one of the most efficient
cost structures in the hospital space, in our view. Max has a well-defined roadmap of
expansion that drives strong growth visibility over the next few years. It plans to add 2,700
beds over the next five years. This includes brownfield expansion in the most attractive
markets such as Delhi, Gurugram and Mumbai. The availability of valuable land bank at
these locations coupled with expansion at existing locations should result in lower capex per
bed, faster breakeven timelines and higher returns. However, at current price levels, we see
limited room for upside and therefore initiate at Neutral.
Valuation
We value Max Healthcare based on a sum-of-the-parts valuation, primarily using EV/
EBITDA methodology for the hospitals business. Our SOTP valuation comprises: (a)
hospitals - 24x FY25e EV/ EBITDA (~20% premium to sector average multiple given its
best in class operating metrics); (b) Max Lab operations - 16x FY25e EV/EBITDA, ~20%
discount to avg consensus multiple of large peers like Metropolis (NC) / Dr. Lal Pathlabs
(NC) given its lower scale and profitability.
Upside risks: continued improvement in margin despite capacity expansion, faster break-
even of newer units. Downside risks: delays in capacity addition, higher losses from new
expansion, delay in payor mix improvement, expensive acquisitions, change in key
management and adverse government regulations.
40
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Max Healthcare: Summary of Financials

COGS (24,294) (26,758) (29,964) (36,722) (44,287) o/w Depreciation & amortization 3,602 2,997 3,496 4,024 4,384
Gross profit 27,416 31,992 36,329 44,163 53,047 o/w Changes in working capital (1,573) 337 (980) (1,399) (1,577)
SG&A - - - - -
Net Interest (1,120) (390) (367) (367) (367)
Adj. PBT 9,810 12,990 15,385 18,651 22,672 Cash flow from financing activities (3,068) (2,315) (1,067) (367) (1,367)
Tax (1,430) 300 (2,308) (2,798) (3,401) o/w Dividends paid - - - - -
Minority Interest 0 0 0 0 0 o/w Shares issued/(repurchased) (63) 13 0 0 0
Adj. Net Income 8,380 13,290 13,077 15,854 19,271 o/w Net debt issued/(repaid) (2,390) (2,990) (700) 0 (1,000)
Reported EPS 9.11 13.76 13.54 16.41 19.95 Net change in cash (509) 9,500 4,326 7,111 13,210
Adj. EPS 9.11 13.76 13.54 16.41 19.95
Adj. Free cash flow to firm 1,719 9,000 5,706 7,791 14,890
DPS - - - - - y/y Growth (28.7%) 423.6% (36.6%) 36.5% 91.1%
Payout ratio - - - - -
Cash and cash equivalents 6,150 15,650 19,976 27,087 40,297 Gross margin 53.0% 54.5% 54.8% 54.6% 54.5%
Inventories 830 1,040 1,453 1,773 2,133 EBIT margin 21.2% 22.9% 23.3% 23.1% 23.3%
Current assets 11,880 21,527 26,833 35,343 50,130
PP&E 32,270 34,580 42,033 49,757 53,622 ROE 13.5% 17.8% 14.7% 15.4% 16.0%
LT investments 20 1,500 1,500 1,500 1,500 ROA 9.6% 13.6% 11.8% 12.7% 13.6%
Net debt/Equity 0.1 NM NM NM NM
Short term borrowings - - - - - Net debt/EBITDA 0.4 NM NM NM NM
Payables - - - - -
Other long term liabilities 18,690 14,110 13,410 13,410 12,410 Operating leverage 410.3% 168.2% 113.5% 95.2% 105.0%
Minority interests - - - - - EBITDA y/y Growth 120.7% 19.6% 15.5% 20.3% 19.5%
Total liabilities & equity 91,130 104,177 116,554 132,408 150,679 EPS y/y Growth (521.7%) 51.0% (1.6%) 21.2% 21.6%
BVPS 73.03 85.08 98.61 115.03 134.98
P/E (x) 64.0 42.4 43.1 35.5 29.2
y/y Growth (31.6%) 16.5% 15.9% 16.6% 17.3%
P/BV (x) 8.0 6.9 5.9 5.1 4.3
EV/EBITDA (x) 42.3 34.6 29.7 24.4 19.9
Net debt/(cash) 5,050 (7,440) (11,766) (18,877) (33,087)
Dividend Yield - - - - -
41
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Initiation
Overweight Fortis Healthcare
FOHE.BO, FORH IN
Price (14 Jun 23):Rs293.45
Expansion improves growth visibility, execution is key
Fortis Healthcare, owned by IHH, is the third-largest pan-India hospital with a capacity of
~4,000 beds. Despite no expansion in the last few years, its hospital EBITDA doubled in the
Pharmaceuticals & Healthcare last three years as it focused on improving operations under the new management led by Dr.
Services Raghuvanshi. However, we believe the hospital margins at 18% have further scope for
Bansi Desai, CFA AC improvement compared to peers. Despite ongoing legal issues, Fortis has not held back from
(91 22) 6157 3581 taking strategic decisions such as acquiring hospitals, rebranding SRL, and potential divest-
[email protected]
ment of non-performing hospitals, which is a positive in our view. Moreover, it gives us
J.P. Morgan India Private Limited, J.P. Morgan further comfort on IHH’s intent and strategy of making Fortis its primary growth engine in
Registration: INH000001873, (91-22) 6157-3000. India. Fortis’s diagnostic business, SRL (57% stake), could also potentially see value
unlock/corporate action through IPO listing/sale to third party/Fortis raising funds in order
to give PE investors an exit by Feb 2024, as per its contractual obligation. We forecast
Style Exposure 13%/17% revenue/EBITDA growth over the next three years. Initiate at Overweight with
a PT of Rs355/sh.
• Hospitals performance improves, scope for further improvement exists: Fortis’s

hospital business delivered 10%/29% rev/EBITDA CAGRs over FY19-23, driven by
improved occupancy, ARPOBs and operational efficiencies. Hospitals within the Fortis
network have a wide range of profitability based on location, payor mix and size. Its
hospital margins have improved to 18% but still remain below peers, with five hospitals
having margins lower than 10%. The turnaround of non-performing assets or divest-
ment of loss-making units could drive ~100-200bps of margin expansion for the hospital
business.
• Maximum scope of brownfield expansion among covered companies: Fortis plans
to add 1,400 beds over the next 3-4 years via brownfield expansion, which should drive
good revenue growth visibility at lower capex/bed. It plans to add 200-250 beds every
year, which will largely be funded by internal accruals. It recently acquired Medeor hos-
pital at Manesar for Rs2.3bn, which has potential to add 350 beds, of which 150 beds
are likely to come up in the next 12 months. Its B/S remains comfortable with net debt/
equity at 0.2x in case it needs to evaluate M&A opportunities.
• SRL – expect value unlock/corporate action by Feb 2024: The diagnostic industry
continues to face challenges due to increased competition and pricing pressure. After
years of no price growth, a few large players have taken small price increases this year
and SRL is likely to decide on this by mid FY24. While it continues to see recovery in
non-COVID tests (on a low base) driven by B2C push and strengthening of network, its
volume growth remains lower than peers. We forecast 11% rev growth driven largely
by volumes and modest improvement in margins (+70bps) over FY23-26E. Fortis has
to provide existing PE an exit by Feb 24, for which it may pursue IPO/sale to third party/
raise funds to acquire balance stake.
• Initiate at OW with a PT of Rs355/sh: We forecast revenue/EBITDA CAGRs of
13%/17% over FY23-26, driven by a focus on profitable growth and bed expansion. Our
PT of Rs355/sh is based on a SOTP valuation, comprising: a) hospital business - 18x Sep
25E EV/EBITDA; and b) diagnostic business – 20x Sep 25E EV/EBITDA. Risks:
inability to improve margins, continued drag of non-performing assets, delay in bed
expansion, change in IHH’s strategy towards Fortis, and adverse outcome on the ongo-
ing legal/regulatory issues.
42
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Investment Thesis
Fortis Healthcare, owned by IHH, is the third-largest pan-India
hospital with a capacity of ~4,000 beds. Despite no expansion in
the last few years, its hospital EBITDA doubled in the last three
years as it focused on improving operations under the new
management led by Dr. Raghuvanshi. However, we believe the
hospital margins at 18% have further scope for improvement
compared to peers. Despite ongoing legal issues, Fortis has not
held back from taking strategic decisions such as acquiring
hospitals, rebranding SRL, and potential divestment of non-
YTD 1m 3m 12m performing hospitals, which is a positive in our view. Moreover,
Abs 4.1% 8.5% 11.8% 27.2% it gives us further comfort in IHH’s intent and strategy for
Rel 0.5% 6.1% 1.7% 8.0%
growing this asset in India. This is further validated by JPM
Company Data analyst Jeff Ng, who covers IHH and believes Fortis is indeed
Shares O/S (mn) 755 IHH’s primary growth engine in India. Fortis’s diagnostic
52-week range (Rs) 325.00-219.75 business, SRL (57% stake), could also potentially see value
Exchange rate 82.38 unlock/corporate action through IPO listing/sale to third party/
Free float(%) 57.9% Fortis raising funds in order to give PE investors an exit by Feb
3M - Avg daily vol (mn) 0.92 2024, as per its contractual obligation.
3M - Avg daily val ($ mn) 3.0
Volatility (90 Day) 23 Valuation
Index NIFTY
BBG BUY|HOLD|SELL 11|0|0 We value Fortis Healthcare based on a sum-of-the-parts
valuation, primarily using EV/EBITDA methodology for the
hospitals business. Our PT of Rs355/sh comprises: a) hospital
Rs in millions FY23A FY24E FY25E FY26E business - 18x Sep 25E EV/EBITDA , ~10% discount to sector
Financial Estimates
Revenue 62,976 70,271 79,367 90,728 average and ~25% discount to Max Healthcare’s target multiple
Adj. EBITDA 11,013 13,186 15,058 17,685 due to lower profitability, return ratios and ongoing legal issues;
Adj. EBIT 7,856 9,692 11,228 13,545 b) diagnostic business – 20x Sep 25E EV/EBITDA, in line with
Adj. net income 5,151 6,712 7,999 9,793
Adj. EPS 6.82 8.89 10.60 12.97 average consensus multiple of large diagnostic peers like
BBG EPS 7.14 9.15 11.11 - Metropolis (NC) and Dr. Lal Pathlabs (NC).
FCFF 4,548 6,122 6,364 8,957
Margins and Growth Performance Drivers
Revenue growth 10.1% 11.6% 12.9% 14.3%
Gross margin - - - -
EBITDA margin 17.5% 18.8% 19.0% 19.5%
EBIT margin 12.5% 13.8% 14.1% 14.9%
Adj. EPS growth 114.6% 30.3% 19.2% 22.4%
Ratios
Adj. tax rate 24.4% 25.0% 25.0% 25.0%
Interest cover 8.5 12.2 16.1 19.6
Net debt/Equity 0.3 0.3 0.2 0.1
Net debt/EBITDA 2.3 1.8 1.3 0.8
ROCE 6.3% 7.6% 8.2% 9.2%
ROE 8.0% 9.6% 10.4% 11.6%
Valuation
FCFF yield 2.1% 2.8% 2.9% 4.0%
Dividend yield 0.3% 0.3% 0.4% 0.5%
EV/Revenue 4.1 3.6 3.2 2.7
EV/EBITDA 23.2 19.2 16.6 13.8
Adj. P/E 43.0 33.0 27.7 22.6
complete or exact.
43
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Rs mn
REVENUES FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Hospitals 35,269 37,521 31,237 42,642 51,072 57,018 64,750 74,406
SRL 8,770 8,790 9,062 14,530 11,900 13,253 14,617 16,322
Consol Revenues 44,694 46,323 40,301 57,176 62,976 70,271 79,367 90,728
EBITDA FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

Hospitals 3,363 4,501 2,539 6,723 9,219 10,491 12,043 14,286
SRL 1,859 1,770 1,746 4,119 2,390 2,694 3,014 3,399
Consol EBITDA 3,176 6,419 4,254 10,829 11,395 13,186 15,058 17,685
EBITDA Margin (%) FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Hospitals 9.5% 12.0% 8.1% 15.8% 18.1% 18.4% 18.6% 19.2%
SRL 21.2% 20.1% 19.3% 28.3% 20.1% 20.3% 20.6% 20.8%
Consol EBITDA Margin 7.1% 13.9% 10.6% 18.9% 18.1% 18.8% 19.0% 19.5%
Table 13: Valuation summary - SOTP

EV/EBITDA
EBITDA Value (Rs MM)
Multiple (x)
India Hospitals 13,165 18 236,965
India SRL (57% stake) 3,207 20 36,556
Total Enterprise Value 273,521

(-) Net Debt 5,750
Equity Value 267,771
Target price (Rs/Sh) 355
Source: J.P. Morgan estimates
44
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Rs mn
Net Revenues 44,694 46,323 40,301 57,176 62,976 70,271 79,367 90,728
% YoY (2.0) 3.6 (13.0) 41.9 10.1 11.6 12.9 14.3
Manufacturing Expenses (26,415) (25,122) (23,023) (30,611) (27,662) (30,919) (34,922) (39,920)
Gross Profit 18,279 21,201 17,278 26,565 35,315 39,352 44,446 50,808
% Gross margin 40.9 45.8 42.9 46.5 56.1 56.0 56.0 56.0
Other Operating Expenses (16,027) (15,106) (13,233) (15,875) (24,301) (26,166) (29,388) (33,122)
EBITDA 2,252 6,095 4,045 10,690 11,013 13,186 15,058 17,685
EBITDA Margin (%) 5.0 13.2 10.0 18.7 17.5 18.8 19.0 19.5
Depreciation (2,329) (2,917) (2,906) (3,008) (3,157) (3,494) (3,830) (4,140)
EBIT (77) 3,178 1,139 7,681 7,856 9,692 11,228 13,545
EBIT Margin (%) (0.2) 6.9 2.8 13.4 12.5 13.8 14.1 14.9
Interest (3,368) (2,051) (1,659) (1,468) (1,291) (1,080) (936) (900)
Other Income 924 526 466 273 617 648 680 714
Share of profit of associates/joint ventures 3,644 122 476 241 218 223 227 232
PBT 1,123 1,775 421 6,728 7,401 9,483 11,199 13,591
Tax (1,136) (1,479) (995) (1,978) (1,807) (2,371) (2,800) (3,398)
Tax Rate (%) 101.2 83.3 236.3 29.4 24.4 25.0 25.0 25.0
PAT Before minorities/ exceptionals (13) 297 (574) 4,749 5,594 7,112 8,399 10,193
Extra-ordinary items/Profit from disc ops (2,223.8) 618.3 12.1 3,150.3 736.1 0.0 0.0 0.0
Minority Interest (752.2) (335.5) (535.9) (2,348.3) (442.5) (400.0) (400.0) (400.0)
PAT (2,989.4) 579.5 (1,097.5) 5,551.2 5,887.3 6,712.0 7,999.4 9,793.3
PAT Margin (%) (6.7) 1.3 (2.7) 9.7 9.3 9.6 10.1 10.8
45
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Rs mn
Shareholders Funds 66,008 66,611 61,198 61,782 67,110 73,111 80,271 89,045
Share Capital 7,550 7,550 7,550 7,550 7,550 7,550 7,550 7,550
Convertible share warrants/share app money 0 0 0 0 0 0 0 0
Reserves and Surplus 58,458 59,061 53,649 54,233 59,561 65,562 72,721 81,495
Share suspense account 0 0 0 0 0 0 0 0
Non-current liabilities 12,478 15,633 32,038 36,071 29,073 29,204 29,347 29,504
Long Term borrowings 6,371 9,541 9,677 7,791 5,722 5,722 5,722 5,722
Lease Liabilities 375 2,125 2,316 2,536 1,826 1,826 1,826 1,826
Other financial liabilities 131 95 16,281 20,784 16,115 16,115 16,115 16,115
Deferred payment 0 0 0 0 0 0 0 0
Deferred Tax Liability 4,808 3,116 2,887 3,812 4,107 4,107 4,107 4,107
Other long term liabilities 134 1 1 0 0 0 0 0
Long term provisions 659 756 876 1,147 1,302 1,433 1,576 1,733
Current Liabilities 35,910 25,789 12,330 12,694 14,260 14,150 15,414 16,992
Short term borrowings 12,307 3,626 1,796 1,866 1,309 1,309 1,309 1,309
Current portion of LT debt 1,049 374 1,236 169 169 169 169 169
Lease Liabilities 16 278 282 356 399 399 399 399
Trade payables 7,535 5,976 5,482 6,609 7,143 7,970 9,002 10,291
Other current liabilities 1,520 1,569 1,321 1,502 2,728 1,790 2,022 2,312
Other financial liabilities 12,634 13,149 1,221 1,483 1,914 1,914 1,914 1,914
Current tax liabilities 61 27 60 24 39 39 39 39
Short term provisions 787 791 931 684 558 558 558 558
TOTAL EQUITY & LIABILITIES 119,512.7 113,478.2 111,546.9 118,847.5 119,024.9 125,046.0 133,612.3 144,121.9
Non-current assets 102,847 104,073 101,179 107,515 110,283 114,179 117,959 121,205
Fixed Assets 52,057 52,853 52,423 54,860 55,143 58,149 60,819 62,679
Gross Block 56,635 50,866 53,004 57,331 61,031 67,531 74,031 80,031
Less: Depreciation 9,075 11,033 13,288 15,586 18,743 22,237 26,067 30,207
Net Block 47,560 39,833 39,716 41,745 42,288 45,294 47,964 49,824
CWIP 4,498 2,038 1,649 1,935 2,277 2,277 2,277 2,277
Right-of-use assets 10,983 11,058 11,179 10,577 10,577 10,577 10,577
Goodwill on Consolidation 37,208 37,208 37,217 41,232 41,410 41,410 41,410 41,410
Investments 1,903 1,745 1,860 1,036 2,103 2,103 2,103 2,103
Deferred Tax Asset 4,653 3,929 3,702 3,691 3,443 3,443 3,443 3,443
Long term loans and advances 864 1,144 351 499 501 501 501 501
Other non-current assets 6,161 7,194 5,625 6,197 7,684 8,574 9,683 11,070
Current Assets, Loans and Advances 16,666 9,405 10,368 11,333 8,742 10,867 15,653 22,917
Current Investments 793 0 0 0 0 0 0 0
Inventories 565 782 768 1,229 1,228 1,371 1,548 1,770
Sundry Debtors 5,424 4,588 3,899 5,122 5,816 6,490 7,330 8,379
Cash and cash equivalents 7,941 1,819 2,612 1,432 (3,922) (351) 3,271 9,079
Bank balance 618 841 1,553 2,695 2,216 2,216 2,216 2,216
Other current assets 531 727 606 629 3,071 770 870 994
Loans & Advances 794 649 930 226 332 371 419 478
TOTAL ASSETS 119,513 113,478 111,547 118,847 119,025 125,046 133,612 144,122
46
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Rs mn
PBT (1,101) 2,394 433 9,878 8,137 9,483 11,199 13,591
Direct Taxes paid/ Refund (2,478) (3,395) 475 (2,114) (1,807) (2,371) (2,800) (3,398)
Depreciation 2,329 2,917 2,906 3,008 3,157 3,494 3,830 4,140
Change in Working Capital (2,474) (1,464) (127) (102) (1,608) 1,337 98 123
Others 1,938 1,263 1,168 (2,016) 1,392 680 536 500
Operating Cash Flows (1,785) 1,716 4,855 8,654 9,271 12,622 12,864 14,957
Net Capex / Divestments (826) (1,366) (2,115) (1,153) (4,043) (6,500) (6,500) (6,000)
Change in Goodwill/Invst in subs (45,721) 739 (11) (3,250) 103 0 0 0
Change in Investments 2,950 574 80 (1,122) (1,067) 0 0 0
Other Investing Activities 10,369 658 694 381 284 0 0 0
Cash flow from Investing (33,227) 604 (1,351) (5,144) (4,723) (6,500) (6,500) (6,000)
Change in Debt 6,481 (6,315) 2,614 (3,396) (2,625) 0 0 0

Equity Issued 40,098 0 0 0 0 0 0 0
Dividends Paid 0 0 0 0 (559) (711) (840) (1,019)
Interest Paid (4,013) (2,049) (1,686) (1,470) (1,291) (1,080) (936) (900)
Other 0 (253) (2,358) (307) (1,333) (760) (967) (1,228)
Cash Flow from Financing 42,566 (8,616) (1,429) (5,173) (5,809) (2,551) (2,743) (3,148)
Change in Cash 7,553 (6,296) 2,075 (1,663) (1,261) 3,571 3,621 5,809
Cash at Beginng of the Year (1,650.6) 6,337.0 71.1 2,191.3 666.0 (582.4) 2,989.0 6,610.3
Cash at End of Year 5,902.8 40.6 2,145.8 528.3 (594.6) 2,989.0 6,610.3 12,418.9
Other adj 2,037.7 1,778.0 466.6 137.7 12.2
Cash as reported in Balance sheet 7,940.5 1,818.6 2,612.3 666.0 (582.4) 2,989.0 6,610.3 12,418.9

ROA (0.0) 0.3 (0.6) 4.6 5.3 6.6 7.3 8.3
ROCE (0.1) 3.8 1.5 10.6 10.8 12.5 13.4 14.7
ROCE (net of cash) (0.1) 4.1 1.5 10.9 10.6 12.2 13.6 15.8
ROE (0.0) 0.4 (0.9) 7.7 8.7 10.1 11.0 12.0
Net Debt 10,767.6 13,283.2 11,142.1 8,591.4 11,131.9 7,560.5 3,939.3 (1,869.3)
Net Debt to Equity 0.2 0.2 0.2 0.1 0.2 0.1 0.0 (0.0)
Net Debt to EBITDA 4.8 2.2 2.8 0.8 1.0 0.6 0.3 (0.1)
Payout ratio 0.0 0.0 0.0 0.0 10.0 10.0 10.0 10.0
Working capital to sales (0.5) 1.7 1.8 1.0 5.2 1.5 1.5 1.5
Current Ratio 0.5 0.4 0.8 0.9 0.6 0.8 1.0 1.3
Receivable days 44 36 35 33 34 34 34 34
Inventory days 5 6 7 8 7 7 7 7
Payable days 62 47 50 42 41 41 41 41
Operating cycle (13) (5) (7) (2) (1) (1) (1) (1)
Interest Cover 0.7 3.0 2.4 7.3 8.5 12.2 16.1 19.6
47
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
35.0
30.0
25.0
20.0
15.0
10.0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
FORH LTA Avg +1SD Avg -1SD
Source: Bloomberg Finance L.P. Note: Based on 12M fwd Bloomberg consensus estimates, LTA = 10yr average EV/EBITDA, pricing as of
14 Jun, 2023
48
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Fortis Healthcare (Overweight; Price Target: Rs355.00)
Investment Thesis
Fortis Healthcare, owned by IHH, is the third-largest pan-India hospital with a capacity of
~4,000 beds. Despite no expansion in the last few years, its hospital EBITDA doubled in the
last three years as it focused on improving operations under the new management led by Dr.
Raghuvanshi. However, we believe the hospital margins at 18% have further scope for
improvement compared to peers. Despite ongoing legal issues, Fortis has not held back from
taking strategic decisions such as acquiring hospitals, rebranding SRL, and potential
divestment of non-performing hospitals, which is a positive in our view. Moreover, it gives
us further comfort in IHH’s intent and strategy for growing this asset in India. This is further
validated by JPM analyst Jeff Ng, who covers IHH and believes Fortis is indeed IHH’s
primary growth engine in India. Fortis’s diagnostic business, SRL (57% stake), could also
potentially see value unlock/corporate action through IPO listing/sale to third party/Fortis
raising funds in order to give PE investors an exit by Feb 2024, as per its contractual
obligation.
Valuation
We value Fortis Healthcare based on a sum-of-the-parts valuation, primarily using EV/
EBITDA methodology for the hospitals business. Our PT of Rs355/sh comprises: a)
hospital business - 18x Sep 25E EV/EBITDA , ~10% discount to sector average and ~25%
discount to Max Healthcare’s target multiple due to lower profitability, return ratios and
ongoing legal issues; b) diagnostic business – 20x Sep 25E EV/EBITDA, in line with
average consensus multiple of large diagnostic peers like Metropolis (NC) and Dr. Lal
Pathlabs (NC).
Downside risks to our rating and price target include inability to improve margins, continued
drag of non-performing assets, delay in bed expansion, change in IHH’s strategy, and
adverse outcome on ongoing legal/regulatory issues.
49
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Fortis Healthcare: Summary of Financials

Gross profit - - - - - o/w Changes in working capital (102) (1,608) 1,337 98 123
SG&A - - - - -
Net Interest (1,468) (1,291) (1,080) (936) (900)
Adj. PBT 6,728 7,401 9,483 11,199 13,591 Cash flow from financing activities (5,173) (5,809) (2,551) (2,743) (3,148)
Tax (1,978) (1,807) (2,371) (2,800) (3,398) o/w Dividends paid 0 (559) (711) (840) (1,019)
Minority Interest (2,348) (443) (400) (400) (400) o/w Shares issued/(repurchased) - - - - -
Adj. Net Income 2,401 5,151 6,712 7,999 9,793 o/w Net debt issued/(repaid) (3,396) (2,625) 0 0 0
Reported EPS 7.35 7.80 8.89 10.60 12.97 Net change in cash (1,663) (1,261) 3,571 3,621 5,809
Adj. EPS 3.18 6.82 8.89 10.60 12.97
Adj. Free cash flow to firm 3,510 4,548 6,122 6,364 8,957
DPS 0.00 0.74 0.94 1.11 1.35 y/y Growth 0.2% 29.6% 34.6% 3.9% 40.7%
Payout ratio 0.0% 9.5% 10.6% 10.5% 10.4%
Cash and cash equivalents 4,127 - 1,866 5,487 11,296 Gross margin - - - - -
Inventories 1,229 1,228 1,371 1,548 1,770 EBIT margin 13.4% 12.5% 13.8% 14.1% 14.9%
Current assets 11,333 8,742 10,867 15,653 22,917
PP&E 54,860 55,143 58,149 60,819 62,679 ROE 3.9% 8.0% 9.6% 10.4% 11.6%
LT investments 1,036 2,103 2,103 2,103 2,103 ROA 2.1% 4.3% 5.5% 6.2% 7.1%
Net debt/Equity 0.4 0.3 0.3 0.2 0.1
Short term borrowings 2,391 1,878 1,878 1,878 1,878 Net debt/EBITDA 2.7 2.3 1.8 1.3 0.8
Payables 6,609 7,143 7,970 9,002 10,291
Minority interests 8,300 8,581 8,581 8,581 8,581 EBITDA y/y Growth 164.3% 3.0% 19.7% 14.2% 17.5%
Total liabilities & equity 118,847 119,025 125,046 133,612 144,122 EPS y/y Growth (316.4%) 114.6% 30.3% 19.2% 22.4%
BVPS 81.84 88.89 96.84 106.32 117.95
P/E (x) 92.3 43.0 33.0 27.7 22.6
y/y Growth 1.0% 8.6% 8.9% 9.8% 10.9%
P/BV (x) 3.6 3.3 3.0 2.8 2.5
EV/EBITDA (x) 24.2 23.2 19.2 16.6 13.8
Net debt/(cash) 29,375 25,541 23,676 20,054 14,246
Dividend Yield 0.0% 0.3% 0.3% 0.4% 0.5%
50
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Initiation
Neutral Global Health
GLOH.NS, MEDANTA IN
Price (14 Jun 23):Rs654.25
Lucknow and Patna offer significant growth opportunity
Founded by Dr. Naresh Trehan, a renowned cardiac surgeon, Global Health (Medanta) is
a leading tertiary and quaternary care healthcare provider, well regarded for its hospital
Pharmaceuticals & Healthcare infrastructure and clinical talent. It operates five hospitals with bed capacity of 2,697 beds
Services spread across five cities with its flagship hospital in Gurugram. Its strategy of expanding
Bansi Desai, CFA AC beds in markets that are underserved is paying off well, as demonstrated by the strong perfor-
(91 22) 6157 3581 mance of newer units in Lucknow and Patna. Medanta plans to add 800-1,300 beds over the
[email protected]
next two years, which should further drive growth visibility. We forecast a 15% EBITDA
J.P. Morgan India Private Limited, J.P. Morgan CAGR over FY23-26E, driven by bed additions, ARPOB improvement and ramp-up in
Registration: INH000001873, (91-22) 6157-3000. occupancy at newer units. However, at current price levels, the stock trades at 20x/17x EV/
EBITDA on our FY25/26 estimates, leaving limited room for upside. Initiate at Neutral with
a PT of Rs710/sh.
Style Exposure
• Gurgaon provides stability, Lucknow and Patna are ramping up well: Medanta’s
mature hospitals (Gurugram, Indore and Ranchi) account for 73% of revenues and
delivered 12% revenue growth last year. Despite the addition of 556 beds over FY20-23
(20% of bed capacity), Medanta’s EBITDA margin improved from 13% to 23% in FY23
driven by the ramp-up in Lucknow (developing hospital margins are 610bps ahead of
mature hospitals) and Patna (achieved breakeven in first year of operation).
• 60% of bed addition is brownfield, driving lower capex/bed: Medanta plans to add
800-1,300 beds by FY25, of which ~770 beds (440 in Lucknow, 240 in Patna and 75 in
Gurugram) are at existing locations, driving lower capex/bed. With strong OCF genera-
tion of ~Rs7bn p.a over the next three years, the expansion requirements should be met
through internal accruals, in our view.
• Healthy EBITDA growth despite expansion: Medanta has delivered strong perfor-
mance with revenue/EBITDA CAGRs of 22%/46% over the last three years. While new
beds are expected to add additional costs, we expect it to be well absorbed and offset by
ARPOB improvement (price hikes, case mix), ramp up of Lucknow and Patna and oper-
ating leverage (fixed cost structure of doctors). We expect ROCE (ex cash) to expand
by ~1,000bps to 31.4% over FY23-26E.
• Initiate at Neutral with a PT of Rs710/sh: Our PT of Rs710/sh is based on 20x Sep
25E EV/EBITDA, at a 20% discount to Max Healthcare. Risks: Higher concentration
from Gurugram asset, key person risk, adverse regulatory actions.
Rs mn
FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Revenues 15,004 14,467 21,673 26,942 31,555 36,960 41,845
EBITDA 1,977 1,977 4,546 6,198 7,352 8,316 9,541
EBITDA Margin (%) 13.2% 13.7% 21.0% 23.0% 23.3% 22.5% 22.8%
51
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Investment Thesis
Founded by Dr. Naresh Trehan, a renowned cardiac surgeon,
Global Health (Medanta) is a leading tertiary and quaternary
care healthcare provider, well regarded for its hospital
infrastructure and clinical talent. It operates five hospitals with
bed capacity of 2,697 beds spread across five cities with its
flagship hospital in Gurugram. Its strategy of expanding beds in
markets that are underserved is paying off well, as demonstrated
by the strong performance of newer units in Lucknow and Patna.
Medanta plans to add 800-1,300 beds over the next two years,
YTD 1m 3m 12m which should further drive growth visibility. We forecast a 15%
Abs 42.2% 20.4% 32.2% - EBITDA CAGR over FY23-26E, driven by bed additions,
Rel 38.6% 18.0% 22.2% -
ARPOB improvement and ramp-up in occupancy at newer
Company Data units. However, at current price levels, the stock trades at
Shares O/S (mn) 259 20x/17x EV/EBITDA on our FY25/26 estimates, leaving
52-week range (Rs) 657.85-390.55 limited room for upside.
Exchange rate 82.38 Valuation
Free float(%) 43.9%
3M - Avg daily vol (mn) 0.48 We value covered companies based on a sum-of-the-parts
3M - Avg daily val ($ mn) 3.2 valuation, primarily using EV/EBITDA for the hospitals
Volatility (90 Day) 36 business. Our PT of Rs710/sh is based on 20x Sep 25E EV/
Index NIFTY
BBG BUY|HOLD|SELL 5|0|0 EBITDA, in line with sector average and at a ~20% discount to
Max Healthcare’s target multiple given Medanta’s lower scale
and higher concentration risk.
Rs in millions FY23A FY24E FY25E FY26E
Financial Estimates
Revenue 26,942 31,555 36,960 41,845
Adj. EBITDA 6,198 7,352 8,316 9,541
Adj. EBIT 4,699 5,572 6,340 7,435
Adj. net income 3,261 4,236 4,852 5,711
Adj. EPS 12.57 16.33 18.71 22.02
BBG EPS 12.60 14.28 17.34 -
FCFF 2,031 2,043 2,221 3,976
Margins and Growth
Revenue growth 24.3% 17.1% 17.1% 13.2%
Gross margin 76.8% 76.5% 76.5% 76.5%
EBITDA margin 23.0% 23.3% 22.5% 22.8%
EBIT margin 17.4% 17.7% 17.2% 17.8%
Adj. EPS growth 61.8% 29.9% 14.5% 17.7%
Ratios
Adj. tax rate 27.4% 26.0% 26.0% 26.0%
Interest cover 8.0 13.1 14.6 16.4
Net debt/Equity 0.2 0.0 NM NM
Net debt/EBITDA 0.7 0.1 NM NM
ROCE 11.0% 11.2% 11.3% 11.7%
ROE 16.4% 16.5% 16.1% 16.1%
Valuation
FCFF yield 1.2% 1.2% 1.3% 2.3%
Dividend yield 0.0% 0.0% 0.0% 0.0%
EV/Revenue 6.1 5.1 4.3 3.6
EV/EBITDA 26.6 22.0 19.0 16.0
Adj. P/E 52.0 40.1 35.0 29.7
complete or exact.
52
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Table 15: Valuation summary
Value (Rs
Segment EBITDA Multiple (x)
MM)
Hospitals 8,928 20 178,566
Less: Net debt (Rs mn) -9,241
Less: Lease liabilities (Rs mn) 2,845
Equity Value (Rs mn) 184,961
Shares outstanding 259
Fair value (Rs/share) 710
Source: J.P. Morgan estimates

Rs mn
Revenue from operations 15,004 14,467 21,673 26,942 31,555 36,960 41,845
Other income 0 0 0 0 0 0 0
Total Income 15,004 14,467 21,673 26,942 31,555 36,960 41,845
% YoY -3.6% 49.8% 24.3% 17.1% 17.1% 13.2%
Cost of materials consumed 3,248 3,486 5,429 6,253 7,415 8,686 9,834
Employee benefits expense 5,388 4,663 5,680 6,343 7,258 8,686 9,834
Other expenses 4,391 4,342 6,018 8,148 9,529 11,273 12,637
EBITDA 1,977 1,977 4,546 6,198 7,352 8,316 9,541
EBITDA Margin (%) 13.2% 13.7% 21.0% 23.0% 23.3% 22.5% 22.8%
Depreciation and amortization expense 1,150 1,232 1,297 1,499 1,781 1,976 2,106
EBIT 827 744 3,249 4,699 5,572 6,340 7,435
EBIT Margin (%) 5.5% 5.1% 15.0% 17.4% 17.7% 17.2% 17.8%
Finance costs (515) (672) (795) (779) (561) (568) (581)
Impairment loss on financial assets (111) (63) (33) (76) 0 0 0
Share of loss in joint venture (0) 0 0 0 0 0 0
PBT 638 324 2,806 4,493 5,725 6,557 7,718
Tax expense (275) (37) (844) (1,232) (1,488) (1,705) (2,007)
Tax rate (%) 43.1% 11.3% 30.1% 27.4% 26.0% 26.0% 26.0%
Net profit 363 288 1,962 3,261 4,236 4,852 5,711
PAT Margin (%) 2.4% 2.0% 9.1% 12.1% 13.4% 13.1% 13.6%
53
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Figure 77: Balance Sheet

Rs mn
Shareholder's funds 13,495 13,823 16,160 23,551 27,787 32,640 38,351
Equity Share Capital 493 496 506 536 536 536 536
Instruments entirely equity in nature 325 325 0 4,100 4,100 4,100 4,100
Other equity 12,677 13,003 15,654 18,914 23,151 28,003 33,714
Non-current liabilities 9,591 9,071 11,100 11,152 11,201 11,251 11,302
LT Debt 6,055 5,777 7,676 7,371 7,371 7,371 7,371
Lease Liabilities 2,703 2,507 2,357 2,455 2,504 2,554 2,605
Deferred tax liabilities 81 0 0 188 188 188 188
LT provisions 361 423 511 541 541 541 541
Other financial liabilities 0 0 98 129 129 129 129
Others 391 363 458 468 468 468 468
Current liabilities 3,577 4,047 4,195 5,728 6,013 6,506 7,060
ST Debt 164 669 702 1,052 1,002 1,102 1,302
Lease Liabilities 367 361 354 342 342 342 342
Trade payables 1,307 1,316 1,343 1,956 2,291 2,683 3,038
Other financial liabilities 1,116 903 976 1,144 1,144 1,144 1,144
ST provisions 189 277 193 258 258 258 258
Other current liabilities 433 522 627 977 977 977 977
TOTAL EQUITY & LIABILITIES 26,663 26,941 31,455 40,431 45,001 50,396 56,713
Non-current assets 21,877 21,920 23,338 25,393 26,131 27,193 27,144

Fixed assets 13,205 12,595 14,385 17,086 17,805 18,829 18,724
CWIP 3,817 4,638 4,393 3,294 3,459 3,632 3,814
Right-of-use assets 3,741 3,489 3,311 3,378 3,209 3,048 2,896
Intangible assets 85 72 63 50 50 50 50
Investments 0 1 1 1 1 1 1
Other financials assets 317 270 199 429 429 429 429
Deferred tax assets 0 257 278 257 257 257 257
Income tax assets 660 471 595 670 670 670 670
Other non-current assets 52 126 114 228 251 276 304
Current assets 4,786 5,021 8,117 15,038 18,871 23,204 29,570
Inventories 385 398 534 605 709 830 940
Financial assets 0 0 0 0 0 0 0
Trade receivables 1,492 1,336 1,802 1,919 2,248 2,633 2,981
Cash and cash equivalents 1,476 695 1,194 6,937 10,323 14,134 20,025
Other bank balances 1,026 2,198 3,924 5,109 5,109 5,109 5,109
Other financials assets 342 318 516 327 327 327 327
Other current assets 66 77 148 141 155 171 188
TOTAL ASSETS 26,663 26,941 31,455 40,431 45,001 50,396 56,713
54
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Rs mn
PBT 638 324 2,806 4,493 5,725 6,557 7,718
Direct Taxes paid/ Refund (562) (164) (980) (1,232) (1,488) (1,705) (2,007)
Depreciation 1,150 1,232 1,297 1,499 1,781 1,976 2,106
Change in Working Capital 21 366 (668) 929 (134) (155) (148)
Other Non-cash Items (incl finance costs) 502 659 658 913 561 568 581
Cash Flow from Operating 1,750 2,417 3,113 6,602 6,444 7,242 8,250
Capex (1,877) (1,419) (2,731) (3,089) (2,665) (3,173) (2,182)

Change in Investments 0 0 0 0 0 0 0
Other Investing Activities 1,007 (972) (1,478) (1,185) 0 0 0
Cash Flow from Investing (871) (2,391) (4,209) (4,274) (2,665) (3,173) (2,182)
Change in Debt 940 (30) 2,152 45 (50) 100 200

Equity Issued 2 2 380 30 0 0 0
Dividends Paid 0 0 0 0 0 0 0
Interest Paid (520) (373) (541) (545) (393) (398) (407)
Others (incl lease payments) (431) (407) (395) 3,886 50 40 29
Cash Flow from Financing (9) (807) 1,596 3,415 (393) (258) (178)
Change in Cash 871 (781) 500 5,743 3,386 3,811 5,891

Cash at Beginning of the Period 605 1,476 695 1,194 6,937 10,323 14,134
Cash at End of the Period 1,476 695 1,194 6,937 10,323 14,134 20,025

ROE 2.7% 2.1% 13.1% 16.4% 16.5% 16.1% 16.1%
ROCE 3.6% 3.2% 13.0% 15.2% 15.1% 15.3% 15.9%
ROCE (post-tax) 2.0% 2.9% 9.1% 11.0% 11.2% 11.3% 11.8%
ROCE (pre-tax, pre-cash) 4.1% 3.7% 15.8% 21.5% 24.8% 27.2% 31.4%
ROIC 2.3% 3.3% 11.0% 15.6% 18.4% 20.1% 23.2%
ROCE (ex lease liabilities) 4.1% 3.7% 14.3% 16.4% 16.2% 16.3% 16.8%
ROIC (ex lease liabilities) 2.7% 3.8% 12.5% 17.6% 20.6% 22.6% 26.1%
Gross Debt 9,289 9,314 11,089 11,220 11,219 11,369 11,620
Net Debt 6,446 6,103 5,456 (1,153) (4,540) (8,200) (13,840)
Net Debt to Equity 0.5 0.4 0.3 (0.0) (0.2) (0.3) (0.4)
Net Debt to EBITDA 3.3 3.1 1.2 (0.2) (0.6) (1.0) (1.5)
Working capital to Sales 0.1 0.1 0.2 0.3 0.4 0.5 0.5
Current Ratio 1.3 1.2 1.9 2.6 3.1 3.6 4.2
Receivable days 36 34 30 26 26 26 26
Inventory days 9 10 9 8 8 8 8
Payable days 32 33 23 27 27 27 27
Cash conversion cycle 14 11 17 8 8 8 8
Interest Coverage 3.8 2.9 5.7 8.0 13.1 14.6 16.4
FCF (877) 275 (218) 2,031 2,043 2,221 3,976
55
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

24
23
22
21
20
19
18
17
16
Mar-23 Apr-23 Apr-23 May-23 May-23 Jun-23
MEDANTA
Source: Bloomberg Finance L.P. Note: Based on 12M fwd Bloomberg consensus estimates. Pricing as of Jun 14, 2023
56
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]

Global Health (Neutral; Price Target: Rs710.00)
Investment Thesis
Founded by Dr. Naresh Trehan, a renowned cardiac surgeon, Global Health (Medanta) is
a leading tertiary and quaternary care healthcare provider, well regarded for its hospital
infrastructure and clinical talent. It operates five hospitals with bed capacity of 2,697 beds
spread across five cities with its flagship hospital in Gurugram. Its strategy of expanding
beds in markets that are underserved is paying off well, as demonstrated by the strong
performance of newer units in Lucknow and Patna. Medanta plans to add 800-1,300 beds
over the next two years, which should further drive growth visibility. We forecast a 15%
EBITDA CAGR over FY23-26E, driven by bed additions, ARPOB improvement and ramp-
up in occupancy at newer units. However, at current price levels, the stock trades at 20x/17x
EV/EBITDA on our FY25/26 estimates, leaving limited room for upside.
Valuation
We value covered companies based on a sum-of-the-parts valuation, primarily using EV/
EBITDA for the hospitals business. Our PT of Rs710/sh is based on 20x Sep 25E EV/
EBITDA, in line with sector average and at a ~20% discount to Max Healthcare’s target
multiple given Medanta’s lower scale and higher concentration risk.
Upside risks: Continued margin expansion despite bed addition, and higher occupancy at
newer units. Downside risks: higher concentration from Gurugram asset, key person risk,
and adverse regulatory actions.
57
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Global Health: Summary of Financials

Gross profit 16,244 20,690 24,139 28,275 32,011 o/w Changes in working capital (668) 929 (134) (155) (148)
SG&A - - - - -
Net Interest (795) (779) (561) (568) (581)
Adj. PBT 2,806 4,493 5,725 6,557 7,718 Cash flow from financing activities 1,596 3,415 (393) (258) (178)
Tax (844) (1,232) (1,488) (1,705) (2,007) o/w Dividends paid 0 0 0 0 0
Minority Interest - - - - - o/w Shares issued/(repurchased) 380 30 0 0 0
Adj. Net Income 1,962 3,261 4,236 4,852 5,711 o/w Net debt issued/(repaid) 2,152 45 (50) 100 200
Reported EPS 7.77 12.57 16.33 18.71 22.02 Net change in cash 500 5,743 3,386 3,811 5,891
Adj. EPS 7.77 12.57 16.33 18.71 22.02
Adj. Free cash flow to firm (218) 2,031 2,043 2,221 3,976
DPS 0.00 0.00 0.00 0.00 0.00 y/y Growth (179.4%)(1030.3%) 0.6% 8.7% 79.0%
Payout ratio 0.0% 0.0% 0.0% 0.0% 0.0%
Cash and cash equivalents 1,194 6,937 10,323 14,134 20,025 Gross margin 74.9% 76.8% 76.5% 76.5% 76.5%
Inventories 534 605 709 830 940 EBIT margin 15.0% 17.4% 17.7% 17.2% 17.8%
Current assets 8,117 15,038 18,871 23,204 29,570
PP&E 22,088 23,757 24,473 25,509 25,433 ROE 13.1% 16.4% 16.5% 16.1% 16.1%
LT investments 1 1 1 1 1 ROA 6.7% 9.1% 9.9% 10.2% 10.7%
Net debt/Equity 0.6 0.2 0.0 NM NM
Short term borrowings 1,056 1,394 1,344 1,444 1,644 Net debt/EBITDA 2.2 0.7 0.1 NM NM
Payables 1,343 1,956 2,291 2,683 3,038
Minority interests - - - - - EBITDA y/y Growth 130.0% 36.4% 18.6% 13.1% 14.7%
Total liabilities & equity 31,455 40,431 45,001 50,396 56,713 EPS y/y Growth 581.6% 61.8% 29.9% 14.5% 17.7%
BVPS 64.08 90.86 107.20 125.92 147.96
P/E (x) 84.2 52.0 40.1 35.0 29.7
y/y Growth 15.9% 41.8% 18.0% 17.5% 17.5%
P/BV (x) 10.2 7.2 6.1 5.2 4.4
EV/EBITDA (x) 37.5 26.6 22.0 19.0 16.0
Net debt/(cash) 9,895 4,283 896 (2,765) (8,405)
Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%
58
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Analyst Certification: The Research Analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple Research Analysts
are primarily responsible for this report, the Research Analyst denoted by an “AC” on the cover or within the document individually certifies,
with respect to each security or issuer that the Research Analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect the Research Analyst’s personal views about any and all of the subject securities or issuers; and (2) no part of any of the
Research Analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
Research Analyst(s) in this report. For all Korea-based Research Analysts listed on the front cover, if applicable, they also certify, as per KOFIA
requirements, that the Research Analyst’s analysis was made in good faith and that the views reflect the Research Analyst’s own opinion,
without undue influence or intervention.
All authors named within this report are Research Analysts who produce independent research unless otherwise specified. In Europe, Sector
Specialists (Sales and Trading) may be shown on this report as contacts but are not authors of the report or part of the Research Department.
Other Disclosure: A contributor to this report has a household member who is a senior portfolio manager of a healthcare fund, which may
invest in instruments discussed in this report.
Important Disclosures
Market Maker/ Liquidity Provider: J.P. Morgan is a market maker and/or liquidity provider in the financial instruments of/related to Apollo
Hospitals, Max Healthcare, Fortis Healthcare, Global Health.
Client: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as clients: Apollo Hospitals.
Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies)
as clients, and the services provided were non-investment-banking, securities-related: Apollo Hospitals.
Non-Investment Banking Compensation Received: J.P. Morgan has received compensation in the past 12 months for products or services
other than investment banking from Apollo Hospitals.
Debt Position: J.P. Morgan may hold a position in the debt securities of Apollo Hospitals, Max Healthcare, Fortis Healthcare, Global Health,
if any.
Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium
reports and all J.P. Morgan–covered companies, and certain non-covered companies, by visiting https://www.jpmm.com/research/disclosures ,
calling 1-800-477-0406, or e-mailing [email protected] with your request.
Date Rating Price (Rs) Price Target
(Rs)
13-Nov-20 OW 2110.45 2,500
07-Jan-21 OW 2502.15 2,750
14-Feb-21 OW 2748.10 3,120
05-Apr-21 OW 2894.05 3,230
25-Jun-21 OW 3203.25 4,000
59
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Date Rating Price (Rs) Price Target

(Rs)
19-Jun-20 OW 122.25 170
13-Nov-20 OW 135.00 180
07-Jan-21 OW 162.10 190
09-Feb-21 OW 168.75 200
01-Jun-21 OW 227.65 265
60
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period.
J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average
total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this
stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight
[Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the
analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock
because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the
price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia and ex-India)
and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country
market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying
analyst’s coverage universe can be found on J.P. Morgan’s research website, https://www.jpmorganmarkets.com .
Coverage Universe: Desai, Bansi: Cipla (CIPL.NS), Dr. Reddy's Labs (REDY.NS), Lupin (LUPN.NS), Mankind Pharma (MNKI.NS),
Rainbow Children’s Hospitals (RAIB.NS), Sun Pharma (SUN.NS)
J.P. Morgan Equity Research Ratings Distribution, as of April 01, 2023

Overweight Neutral Underweight
(buy) (hold) (sell)
J.P. Morgan Global Equity Research Coverage* 47% 38% 15%
IB clients** 47% 44% 34%
JPMS Equity Research Coverage* 46% 41% 13%
IB clients** 66% 65% 53%
*Please note that the percentages might not add to 100% because of rounding.
**Percentage of subject companies within each of the "buy," "hold" and "sell" categories for which J.P. Morgan has provided
investment banking services within the previous 12 months.
For purposes only of FINRA ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls
into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation
are not included in the table above. This information is current as of the end of the most recent calendar quarter.
Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies,
please see the most recent company-specific research report at http://www.jpmorganmarkets.com , contact the primary analyst or your J.P.
Morgan representative, or email [email protected] . For material information about the proprietary models used,
please see the Summary of Financials in company-specific research reports and the Company Tearsheets, which are available to download on
the company pages of our client website, http://www.jpmorganmarkets.com . This report also sets out within it the material underlying
assumptions used.
A history of J.P. Morgan investment recommendations disseminated during the preceding 12 months can be accessed on the Research &
Commentary page of http://www.jpmorganmarkets.com where you can also search by analyst name, sector or financial instrument.
Analysts' Compensation:The research analysts responsible for the preparation of this report receive compensation based upon various factors,
including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.
Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US
affiliates of J.P. Morgan Securities LLC, may not be registered as research analysts under FINRA rules, may not be associated persons of J.P.
Morgan Securities LLC, and may not be subject to FINRA Rule 2241 or 2242 restrictions on communications with covered companies, public
appearances, and trading securities held by a research analyst account.
Other Disclosures
J.P. Morgan is a marketing name for investment banking businesses of JPMorgan Chase & Co. and its subsidiaries and affiliates worldwide.
UK MIFID FICC research unbundling exemption: UK clients should refer to UK MIFID Research Unbundling exemption for details of
JPMorgan’s implementation of the FICC research exemption and guidance on relevant FICC research categorisation.
All research material made available to clients are simultaneously available on our client website, J.P. Morgan Markets, unless specifically
permitted by relevant laws. Not all research content is redistributed, e-mailed or made available to third-party aggregators. For all research
material available on a particular stock, please contact your sales representative.
Any long form nomenclature for references to China; Hong Kong; Taiwan; and Macau within this research material are Mainland China; Hong
Kong SAR (China); Taiwan (China); and Macau SAR (China).
61
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
J.P. Morgan Research may, from time to time, write on issuers or securities targeted by economic or financial sanctions imposed or administered
by the governmental authorities of the U.S., EU, UK or other relevant jurisdictions (Sanctioned Securities). Nothing in this report is intended to
be read or construed as encouraging, facilitating, promoting or otherwise approving investment or dealing in such Sanctioned Securities. Clients
should be aware of their own legal and compliance obligations when making investment decisions.
Any digital or crypto assets discussed in this research report are subject to a rapidly changing regulatory landscape. For relevant regulatory
advisories on crypto assets, including bitcoin and ether, please see https://www.jpmorgan.com/disclosures/cryptoasset-disclosure .
The author(s) of this research report may not be licensed to carry on regulated activities in your jurisdiction and, if not licensed, do not hold
themselves out as being able to do so.
Exchange-Traded Funds (ETFs): J.P. Morgan Securities LLC (“JPMS”) acts as authorized participant for substantially all U.S.-listed ETFs. To
the extent that any ETFs are mentioned in this report, JPMS may earn commissions and transaction-based compensation in connection with the
distribution of those ETF shares and may earn fees for performing other trade-related services, such as securities lending to short sellers of the
ETF shares. JPMS may also perform services for the ETFs themselves, including acting as a broker or dealer to the ETFs. In addition, affiliates
of JPMS may perform services for the ETFs, including trust, custodial, administration, lending, index calculation and/or maintenance and other
services.
Options and Futures related research: If the information contained herein regards options- or futures-related research, such information is
available only to persons who have received the proper options or futures risk disclosure documents. Please contact your J.P. Morgan
Representative or visit https://www.theocc.com/components/docs/riskstoc.pdf for a copy of the Option Clearing Corporation's Characteristics
and Risks of Standardized Options or http://www.finra.org/sites/default/files/Security_Futures_Risk_Disclosure_Statement_2018.pdf for a copy
of the Security Futures Risk Disclosure Statement.
Changes to Interbank Offered Rates (IBORs) and other benchmark rates: Certain interest rate benchmarks are, or may in the future
become, subject to ongoing international, national and other regulatory guidance, reform and proposals for reform. For more information, please
consult: https://www.jpmorgan.com/global/disclosures/interbank_offered_rates
Private Bank Clients: Where you are receiving research as a client of the private banking businesses offered by JPMorgan Chase & Co. and its
subsidiaries (“J.P. Morgan Private Bank”), research is provided to you by J.P. Morgan Private Bank and not by any other division of J.P. Morgan,
including, but not limited to, the J.P. Morgan Corporate and Investment Bank and its Global Research division.
Legal entity responsible for the production and distribution of research: The legal entity identified below the name of the Reg AC Research
Analyst who authored this material is the legal entity responsible for the production of this research. Where multiple Reg AC Research Analysts
authored this material with different legal entities identified below their names, these legal entities are jointly responsible for the production of
this research. Research Analysts from various J.P. Morgan affiliates may have contributed to the production of this material but may not be
licensed to carry out regulated activities in your jurisdiction (and do not hold themselves out as being able to do so). Unless otherwise stated
below, this material has been distributed by the legal entity responsible for production. If you have any queries, please contact the relevant
Research Analyst in your jurisdiction or the entity in your jurisdiction that has distributed this research material.
Legal Entities Disclosures and Country-/Region-Specific Disclosures:
Argentina: JPMorgan Chase Bank N.A Sucursal Buenos Aires is regulated by Banco Central de la República Argentina (“BCRA”- Central
Bank of Argentina) and Comisión Nacional de Valores (“CNV”- Argentinian Securities Commission” - ALYC y AN Integral N°51). Australia:
J.P. Morgan Securities Australia Limited (“JPMSAL”) (ABN 61 003 245 234/AFS Licence No: 238066) is regulated by the Australian
Securities and Investments Commission and is a Market, Clearing and Settlement Participant of ASX Limited and CHI-X. This material is
issued and distributed in Australia by or on behalf of JPMSAL only to "wholesale clients" (as defined in section 761G of the Corporations Act
2001). A list of all financial products covered can be found by visiting https://www.jpmm.com/research/disclosures . J.P. Morgan seeks to cover
companies of relevance to the domestic and international investor base across all Global Industry Classification Standard (GICS) sectors, as well
as across a range of market capitalisation sizes. If applicable, in the course of conducting public side due diligence on the subject company(ies),
the Research Analyst team may at times perform such diligence through corporate engagements such as site visits, discussions with company
representatives, management presentations, etc. Research issued by JPMSAL has been prepared in accordance with J.P. Morgan Australia’s
Research Independence Policy which can be found at the following link: J.P. Morgan Australia - Research Independence Policy . Brazil: Banco
J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Ombudsman J.P. Morgan:
0800-7700847 / [email protected] . Canada: J.P. Morgan Securities Canada Inc. is a registered investment dealer, regulated
by the Investment Industry Regulatory Organization of Canada and the Ontario Securities Commission and is the participating member on
Canadian exchanges. This material is distributed in Canada by or on behalf of J.P.Morgan Securities Canada Inc. Chile: Inversiones J.P. Morgan
Limitada is an unregulated entity incorporated in Chile. China: J.P. Morgan Securities (China) Company Limited has been approved by CSRC
to conduct the securities investment consultancy business. Dubai International Financial Centre (DIFC): JPMorgan Chase Bank, N.A., Dubai
Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - The
Gate, West Wing, Level 3 and 9 PO Box 506551, Dubai, UAE. This material has been distributed by JP Morgan Chase Bank, N.A., Dubai
Branch to persons regarded as professional clients or market counterparties as defined under the DFSA rules. European Economic Area
(EEA): Unless specified to the contrary, research is distributed in the EEA by J.P. Morgan SE (“JPM SE”), which is subject to prudential
supervision by the European Central Bank (“ECB”) in cooperation with BaFin and Deutsche Bundesbank in Germany. JPM SE is a company
headquartered in Frankfurt with registered address at TaunusTurm, Taunustor 1, Frankfurt am Main, 60310, Germany. The material has been
distributed in the EEA to persons regarded as professional investors (or equivalent) pursuant to Art. 4 para. 1 no. 10 and Annex II of MiFID II
62
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
and its respective implementation in their home jurisdictions (“EEA professional investors”). This material must not be acted on or relied on by
persons who are not EEA professional investors. Any investment or investment activity to which this material relates is only available to EEA
relevant persons and will be engaged in only with EEA relevant persons. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE
number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong, and J.P.
Morgan Broking (Hong Kong) Limited (CE number AAB027) is regulated by the Securities and Futures Commission in Hong Kong. JP Morgan
Chase Bank, N.A., Hong Kong Branch (CE Number AAL996) is regulated by the Hong Kong Monetary Authority and the Securities and
Futures Commission, is organized under the laws of the United States with limited liability. Where the distribution of this material is a regulated
activity in Hong Kong, the material is distributed in Hong Kong by or through J.P. Morgan Securities (Asia Pacific) Limited and/or J.P. Morgan
Broking (Hong Kong) Limited. India: J.P. Morgan India Private Limited (Corporate Identity Number - U67120MH1992FTC068724), having its
registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz - East, Mumbai – 400098, is registered with the Securities and
Exchange Board of India (SEBI) as a ‘Research Analyst’ having registration number INH000001873. J.P. Morgan India Private Limited is also
registered with SEBI as a member of the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited (SEBI
Registration Number – INZ000239730) and as a Merchant Banker (SEBI Registration Number - MB/INM000002970). Telephone: 91-22-6157
3000, Facsimile: 91-22-6157 3990 and Website: http://www.jpmipl.com . JPMorgan Chase Bank, N.A. - Mumbai Branch is licensed by the
Reserve Bank of India (RBI) (Licence No. 53/ Licence No. BY.4/94; SEBI - IN/CUS/014/ CDSL : IN-DP-CDSL-444-2008/ IN-DP-NSDL-285-
2008/ INBI00000984/ INE231311239) as a Scheduled Commercial Bank in India, which is its primary license allowing it to carry on Banking
business in India and other activities, which a Bank branch in India are permitted to undertake. For non-local research material, this material is
not distributed in India by J.P. Morgan India Private Limited. Compliance Officer: Spurthi Gadamsetty; [email protected] ;
+912261573225. Grievance Officer: Ramprasadh K, [email protected] ; +912261573000.
Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration
granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of
returns to investors.
Indonesia: PT J.P. Morgan Sekuritas Indonesia is a member of the Indonesia Stock Exchange and is registered and supervised by the Otoritas
Jasa Keuangan (OJK). Korea: J.P. Morgan Securities (Far East) Limited, Seoul Branch, is a member of the Korea Exchange (KRX). JPMorgan
Chase Bank, N.A., Seoul Branch, is licensed as a branch office of foreign bank (JPMorgan Chase Bank, N.A.) in Korea. Both entities are
regulated by the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS). For non-macro research material, the
material is distributed in Korea by or through J.P. Morgan Securities (Far East) Limited, Seoul Branch. Japan: JPMorgan Securities Japan Co.,
Ltd. and JPMorgan Chase Bank, N.A., Tokyo Branch are regulated by the Financial Services Agency in Japan. Malaysia: This material is issued
and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X), which is a Participating Organization of Bursa Malaysia
Berhad and holds a Capital Markets Services License issued by the Securities Commission in Malaysia. Mexico: J.P. Morgan Casa de Bolsa,
S.A. de C.V.and J.P. Morgan Grupo Financiero are members of the Mexican Stock Exchange and are authorized to act as a broker dealer by the
National Banking and Securities Exchange Commission. New Zealand: This material is issued and distributed by JPMSAL in New Zealand
only to "wholesale clients" (as defined in the Financial Markets Conduct Act 2013). JPMSAL is registered as a Financial Service Provider under
the Financial Service providers (Registration and Dispute Resolution) Act of 2008. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a
member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Philippines: J.P. Morgan
Securities Philippines Inc. is a Trading Participant of the Philippine Stock Exchange and a member of the Securities Clearing Corporation of the
Philippines and the Securities Investor Protection Fund. It is regulated by the Securities and Exchange Commission. Russia: CB J.P. Morgan
Bank International LLC is regulated by the Central Bank of Russia. Singapore: This material is issued and distributed in Singapore by or
through J.P. Morgan Securities Singapore Private Limited (JPMSS) [MCI (P) 060/08/2022 and Co. Reg. No.: 199405335R], which is a member
of the Singapore Exchange Securities Trading Limited, and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore), both of
which are regulated by the Monetary Authority of Singapore. This material is issued and distributed in Singapore only to accredited investors,
expert investors and institutional investors, as defined in Section 4A of the Securities and Futures Act, Cap. 289 (SFA). This material is not
intended to be issued or distributed to any retail investors or any other investors that do not fall into the classes of “accredited investors,” “expert
investors” or “institutional investors,” as defined under Section 4A of the SFA. Recipients of this material in Singapore are to contact JPMSS or
JPMCB Singapore in respect of any matters arising from, or in connection with, the material. As at the date of this material, JPMSS is a
designated market maker for certain structured warrants listed on the Singapore Exchange where the underlying securities may be the securities
discussed in this material. Arising from its role as a designated market maker for such structured warrants, JPMSS may conduct hedging
activities in respect of such underlying securities and hold or have an interest in such underlying securities as a result. The updated list of
structured warrants for which JPMSS acts as designated market maker may be found on the website of the Singapore Exchange Limited:
http://www.sgx.com . South Africa: J.P. Morgan Equities South Africa Proprietary Limited and JPMorgan Chase Bank, N.A., Johannesburg
Branch are members of the Johannesburg Securities Exchange and are regulated by the Financial Services Board. Taiwan: J.P. Morgan
Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures
Bureau. Material relating to equity securities is issued and distributed in Taiwan by J.P. Morgan Securities (Taiwan) Limited, subject to the
license scope and the applicable laws and the regulations in Taiwan. According to Paragraph 2, Article 7-1 of Operational Regulations
Governing Securities Firms Recommending Trades in Securities to Customers (as amended or supplemented) and/or other applicable laws or
regulations, please note that the recipient of this material is not permitted to engage in any activities in connection with the material that may
give rise to conflicts of interests, unless otherwise disclosed in the “Important Disclosures” in this material. Thailand: This material is issued
and distributed in Thailand by JPMorgan Securities (Thailand) Ltd., which is a member of the Stock Exchange of Thailand and is regulated by
the Ministry of Finance and the Securities and Exchange Commission, and its registered address is 3rd Floor, 20 North Sathorn Road, Silom,
Bangrak, Bangkok 10500. UK: Unless specified to the contrary, research is distributed in the UK by J.P. Morgan Securities plc (“JPMS plc”)
which is a member of the London Stock Exchange and is authorised by the Prudential Regulation Authority and regulated by the Financial
63
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
Conduct Authority and the Prudential Regulation Authority. JPMS plc is registered in England & Wales No. 2711006, Registered Office 25
Bank Street, London, E14 5JP. This material is directed in the UK only to: (a) persons having professional experience in matters relating to
investments falling within article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) (Order) 2005 (“the FPO”); (b)
persons outlined in article 49 of the FPO (high net worth companies, unincorporated associations or partnerships, the trustees of high value
trusts, etc.); or (c) any persons to whom this communication may otherwise lawfully be made; all such persons being referred to as "UK relevant
persons". This material must not be acted on or relied on by persons who are not UK relevant persons. Any investment or investment activity to
which this material relates is only available to UK relevant persons and will be engaged in only with UK relevant persons. Research issued by
JPMS plc has been prepared in accordance with JPMS plc's policy for prevention and avoidance of conflicts of interest related to the production
of Research which can be found at the following link: J.P. Morgan EMEA - Research Independence Policy . U.S.: J.P. Morgan Securities LLC
(“JPMS”) is a member of the NYSE, FINRA, SIPC, and the NFA. JPMorgan Chase Bank, N.A. is a member of the FDIC. Material published by
non-U.S. affiliates is distributed in the U.S. by JPMS who accepts responsibility for its content.
General: Additional information is available upon request. The information in this material has been obtained from sources believed to be
reliable. While all reasonable care has been taken to ensure that the facts stated in this material are accurate and that the forecasts, opinions and
expectations contained herein are fair and reasonable, JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) make
no representations or warranties whatsoever to the completeness or accuracy of the material provided, except with respect to any disclosures
relative to J.P. Morgan and the Research Analyst's involvement with the issuer that is the subject of the material. Accordingly, no reliance should
be placed on the accuracy, fairness or completeness of the information contained in this material. There may be certain discrepancies with data
and/or limited content in this material as a result of calculations, adjustments, translations to different languages, and/or local regulatory
restrictions, as applicable. These discrepancies should not impact the overall investment analysis, views and/or recommendations of the subject
company(ies) that may be discussed in the material. J.P. Morgan accepts no liability whatsoever for any loss arising from any use of this material
or its contents, and neither J.P. Morgan nor any of its respective directors, officers or employees, shall be in any way responsible for the contents
hereof, apart from the liabilities and responsibilities that may be imposed on them by the relevant regulatory authority in the jurisdiction in
question, or the regulatory regime thereunder. Opinions, forecasts or projections contained in this material represent J.P. Morgan's current
opinions or judgment as of the date of the material only and are therefore subject to change without notice. Periodic updates may be provided on
companies/industries based on company-specific developments or announcements, market conditions or any other publicly available
information. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or projections, which
represent only one possible outcome. Furthermore, such opinions, forecasts or projections are subject to certain risks, uncertainties and
assumptions that have not been verified, and future actual results or events could differ materially. The value of, or income from, any
investments referred to in this material may fluctuate and/or be affected by changes in exchange rates. All pricing is indicative as of the close of
market for the securities discussed, unless otherwise stated. Past performance is not indicative of future results. Accordingly, investors may
receive back less than originally invested. This material is not intended as an offer or solicitation for the purchase or sale of any financial
instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not
intended as recommendations of particular securities, financial instruments or strategies to particular clients. This material may include views on
structured securities, options, futures and other derivatives. These are complex instruments, may involve a high degree of risk and may be
appropriate investments only for sophisticated investors who are capable of understanding and assuming the risks involved. The recipients of
this material must make their own independent decisions regarding any securities or financial instruments mentioned herein and should seek
advice from such independent financial, legal, tax or other adviser as they deem necessary. J.P. Morgan may trade as a principal on the basis of
the Research Analysts’ views and research, and it may also engage in transactions for its own account or for its clients’ accounts in a manner
inconsistent with the views taken in this material, and J.P. Morgan is under no obligation to ensure that such other communication is brought to
the attention of any recipient of this material. Others within J.P. Morgan, including Strategists, Sales staff and other Research Analysts, may take
views that are inconsistent with those taken in this material. Employees of J.P. Morgan not involved in the preparation of this material may have
investments in the securities (or derivatives of such securities) mentioned in this material and may trade them in ways different from those
discussed in this material. This material is not an advertisement for or marketing of any issuer, its products or services, or its securities in any
jurisdiction.
Confidentiality and Security Notice: This transmission may contain information that is privileged, confidential, legally privileged, and/or
exempt from disclosure under applicable law. If you are not the intended recipient, you are hereby notified that any disclosure, copying,
distribution, or use of the information contained herein (including any reliance thereon) is STRICTLY PROHIBITED. Although this
transmission and any attachments are believed to be free of any virus or other defect that might affect any computer system into which it is
received and opened, it is the responsibility of the recipient to ensure that it is virus free and no responsibility is accepted by JPMorgan Chase &
Co., its subsidiaries and affiliates, as applicable, for any loss or damage arising in any way from its use. If you received this transmission in
error, please immediately contact the sender and destroy the material in its entirety, whether in electronic or hard copy format. This message is
subject to electronic monitoring: https://www.jpmorgan.com/disclosures/email
MSCI: Certain information herein (“Information”) is reproduced by permission of MSCI Inc., its affiliates and information providers (“MSCI”)
©2023. No reproduction or dissemination of the Information is permitted without an appropriate license. MSCI MAKES NO EXPRESS OR
IMPLIED WARRANTIES (INCLUDING MERCHANTABILITY OR FITNESS) AS TO THE INFORMATION AND DISCLAIMS ALL
LIABILITY TO THE EXTENT PERMITTED BY LAW. No Information constitutes investment advice, except for any applicable Information
from MSCI ESG Research. Subject also to msci.com/disclaimer
"Other Disclosures" last revised May 13, 2023.
Copyright 2023 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or
64
MGMT AHM.
(91 22) 6157 3581 15 June 2023 JPMORGAN
[email protected]
redistributed without the written consent of J.P. Morgan. #$J&098$#*P

Completed 15 Jun 2023 02:55 AM HKT Disseminated 15 Jun 2023 02:55 AM HKT
65

JP Morgan MEDANTA-In Indian Hospitals - Ripe To Absorb Expansion - Initiating C

Uploaded by

Copyright:

Available Formats

JP Morgan MEDANTA-In Indian Hospitals - Ripe To Absorb Expansion - Initiating C

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

JP Morgan MEDANTA-In Indian Hospitals - Ripe To Absorb Expansion - Initiating C

Uploaded by

Copyright:

Available Formats

This document

Equity Ratings and Price Targets

Adj. EBITDA Estimate Changes

Initiate with OW on Apollo and Fortis,

Figure 3: Fortis Healthcare - Target

Indian Hospitals comparison

Table 1: Hospitals comparison of covered stocks

Valuation and performance

Source: Bloomberg Finance L.P. Note: Priced as of Jun 14, 2023.

Figure 5: Hospital sector valuations - 1 year forward EV/EBITDA

Table 3: Valuation - domestic and regional peers

Table 4: JPMe vs Consensus

Table 5: Summarized views on covered companies

Key trends in operating and financial parameters

India Healthcare Opportunity

Share of government spends has risen but remains low

hands of private players.

6.0% 5.4% 5.1%

Structural shortages and uneven access to healthcare

of a facility in the vicinity.

Source: National Health Profile Source: National Health Profile

Figure 28: Bed density in Tier I cities

80 Long waiting time

20 36% 38% 40% 42% 44% 46% 48% 50%

53.7 55.4 55.3 50.2 35.6

Structural demand factors drive strong growth visibility

Source: World Bank Source: UN World Cities Report, 2022

40.0 45.0 50.0 55.0 60.0 65.0 70.0 75.0 65.0

Increasing incidence of chronic diseases

0% 5% 10% 15% 20% 25% 30%

Source: WHO Global Health Observatory

Source: WHO Global Health Observatory

Rising insurance penetration is the key for private players

Out of pocket Government Private insurance

40.0 33.2 34.5 35.3

Source: National Health Estimates, 2019-20

Source: Global Expenditure Database, WHO

Source: NSS Report 2017-2018 Source: NSS Report 2017-2018

Source: IRDAI reports Source: IRDAI reports

Medical tourism presents big opportunity

Figure 50: Medical tourism arrivals are starting to recover

Source: Global Wellness Institute Source: Bureau of Immigration

Government initiatives allow premium hospital chains to focus on cash/insurance

Some of the recent significant initiatives by the central government are:

Source: Union and State Budget documents

Ayushman Bharat: The government launched Ayushman Bharat in 2018 to provide

Figure 54: Ayushman Bharat spending has lagged allocation

Source: Ministry of Health & Family Welfare

Source: National Health Profile Source: National Health Profile

Digital platforms offer significant growth potential

15% 13% 13% 40 32

Source: EY Parthenon survey. Source: Redseer research.

• Execution risk: Delay in project completion, slower ramp-up of occupancy or

Price Performance Summary Investment Thesis and Valuation

Table 8: Forecast summary

Table 9: Valuations summary - SOTP

Figure 61: Income statement

Figure 62: Balance sheet

Figure 63: Cash flow statement