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Hidden Gem - Rainbow Children’s Medicare

ICICIdirect Research 01 Aug 2025 DISCLAIMER

Rainbow Children’s Medicare is a leading chain of paediatric multi-speciality and perinatal hospitals in India, operating 20 hospitals in 7 cities, with a total bed capacity of 2,035 beds.
Rainbow’s expertise in the most case-sensitive healthcare cohort that is paediatric and perinatal care and its efficient synergy across paediatric and perinatal services makes it a standout player among peers.
Strong EBITDA margins trajectory (+28%) over the last 13 quarters is also a key differentiator besides better return ratios.
For Q1FY26, Rainbow’s revenues grew ~7% YoY to ₹ 353 crore, driven by 13% growth in ARPOB to ₹ 63323. EBITDA grew ~11% YoY to ~₹ 104 crore and EBITDA margins grew by 98 bps to 29.4%.  The quarter was little a subdued on the revenues front due to ~11% YoY decrease in occupancies at the matured hospitals which led to just ~2%revenues growth.
However, going ahead the management is expecting significant traction in FY26 to be driven by new beds addition better occupancies in the matured hospitals.  
Stretching further to the next 2-3 years, the company will be adding ~850 beds in cities like Bengaluru, Coimbatore and Gurugram (~450 beds) with a capex of ~850 crore and also wants to expand in Pune.
Being the only listed player in this cohort, the company continues to attract investors interest. Our target price is ₹ 1870 based on 29x FY27E EBITDA of ₹ 633.

 

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