Buy Rainbow Childrens Medicare; target of Rs 1700: Emkay Global Financial

Emkay Global Financial's research report on Rainbow Childrens Medicare

Rainbow’s Q3FY25 print was largely in line with our estimates as revenue/EBITDA grew 18%/14% YoY, respectively. Ramp up in new hospitals remains strong with breakeven expected for Hyderabad hospitals (commissioned during Q4FY24) within the next quarter. Delay in commissioning of hospitals in the pipeline, however, was a slight dampener in our view. We believe the company has multiple margin levers that would offset the expected drag from its staggered bed expansion plans over FY25-27 as we anticipate EBITDA CAGR at 18%. Strong net cash balance sheet and robust cash conversion provide comfort on valuations. Baking in the delay in execution,

Outlook

We cut FY26/27E EBITDA by 3% and trim Dec-25E TP to Rs1,700 (5.6% cut) based on 29x Dec-26E pre-IndAS EV/EBITDA.