The stock, trading at ₹648.60 as of February 05, 2026, has delivered a remarkable 47.16% return over the past year, significantly outperforming the Sensex's 6.44% gain and generating an alpha of 40.72 percentage points. However, recent months have been challenging, with the stock declining 21.03% over the past three months and trading 23.06% below its 52-week high of ₹843.00, reflecting investor concerns over premium valuations and margin trajectory.
Quarterly Performance Trajectory: Sustained Growth Amid Scale-Up
| Quarter | Revenue (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | Operating Margin |
|---|---|---|---|---|---|
| Dec'25 (Q3) | 320.47 | +14.69% | 45.35 | +9.97% | 23.17% |
| Sep'25 (Q2) | 279.42 | +8.40% | 41.24 | -1.90% | 23.09% |
| Jun'25 (Q1) | 257.77 | +11.21% | 42.04 | +8.57% | 25.02% |
| Mar'25 (Q4) | 231.78 | +5.76% | 38.72 | +26.99% | 24.61% |
| Dec'24 (Q3) | 219.16 | +0.64% | 30.49 | -1.49% | 25.06% |
| Sep'24 (Q2) | 217.77 | +2.83% | 30.95 | +1.88% | 25.09% |
| Jun'24 (Q1) | 211.78 | — | 30.38 | — | 25.34% |
Financial Performance: Revenue Acceleration Masks Margin Concerns
In Q3 FY26, Yatharth Hospital demonstrated impressive top-line momentum, with net sales reaching ₹320.47 crores, representing a robust 14.69% sequential growth and a remarkable 46.23% year-on-year expansion. This marked the seventh consecutive quarter of revenue growth, underscoring the company's successful capacity expansion and patient footfall improvement across its hospital network. The quarter-on-quarter acceleration from 8.40% in Q2 FY26 to 14.69% in Q3 FY26 signals strong operational traction heading into the seasonally favourable winter months for healthcare services.
However, the stellar revenue growth came at the cost of margin compression. Operating profit (PBDIT excluding other income) stood at ₹74.25 crores in Q3 FY26, with operating margins contracting to 23.17% from 25.02% in Q1 FY26 and 25.06% in the year-ago quarter. This 185 basis point year-on-year margin erosion reflects elevated employee costs, which surged to ₹63.54 crores in Q3 FY26 from ₹42.62 crores in Q3 FY25, a 49.09% increase that outpaced revenue growth. The employee cost-to-sales ratio expanded to 19.83% from 19.45% year-ago, indicating investments in medical and administrative talent to support capacity expansion.
Net profit after tax (PAT) of ₹45.35 crores represented a 48.74% year-on-year jump and 9.97% sequential growth, with the PAT margin standing at 13.44%. Whilst profitability growth remained strong in absolute terms, PAT margins contracted from 16.31% in Q1 FY26, reflecting the dual impact of operating margin pressure and higher depreciation charges of ₹23.96 crores (up from ₹16.91 crores year-ago) as new hospital facilities were commissioned. Other income contributed ₹7.83 crores, down from ₹9.49 crores in Q2 FY26, indicating lower treasury income as funds were deployed towards expansion activities.
Balance Sheet Quality: Net Cash Position Strengthens Post-IPO
Yatharth Hospital's balance sheet reflects the transformational impact of its successful initial public offering in FY25. Shareholder funds surged to ₹1,605.46 crores as of March 2025 from ₹874.32 crores a year earlier, driven by fresh equity infusion and retained earnings. The company's net debt-to-equity ratio stood at a negative 0.15, indicating a net cash position—a significant improvement from the ₹75.25 crores of long-term debt in March 2024. Current assets of ₹855.73 crores as of March 2025 provided ample liquidity, with closing cash balances reaching ₹361.00 crores in FY25 compared to ₹112.00 crores in FY24.
The return on equity (ROE) of 11.44% on an average basis, whilst positive, remains modest relative to the capital base following the equity dilution from the IPO. However, the latest ROE of 9.03% reflects the deployment phase of IPO proceeds into capacity expansion, with new facilities yet to reach optimal utilisation. Return on capital employed (ROCE) stood at 19.03% on an average basis and 12.32% for the latest period, indicating reasonable capital efficiency despite the ongoing investment cycle. The company's interest coverage ratio of 29.60 times and negligible debt-to-EBITDA ratio of 0.23 underscore its strong financial flexibility to fund growth without leverage constraints.
Financial Strength Highlights
Net Cash Company: Yatharth Hospital transitioned to a net cash position with negative net debt-to-equity of -0.15, providing significant financial flexibility for organic expansion and potential acquisitions. The company's cash flow from operations of ₹149.00 crores in FY25 covered capital expenditure requirements, demonstrating self-sustaining growth capability.
Interest Coverage: With EBIT-to-interest coverage of 29.60 times, the company faces virtually no financial risk from debt servicing, allowing management to focus entirely on operational execution rather than balance sheet management.
The Margin Challenge: Scale Benefits Yet to Materialise
The most pressing concern for investors in Yatharth Hospital is the persistent margin compression despite strong revenue growth. Operating margins (excluding other income) have contracted from 25.34% in Q1 FY24 to 23.17% in Q3 FY26, a decline of 217 basis points over six quarters. This trend contradicts the typical healthcare sector dynamics where scale expansion drives operating leverage and margin improvement. The company's five-year operating profit (EBIT) growth of 15.63% has lagged its sales CAGR of 27.58%, highlighting the margin pressure challenge.
Several factors explain this margin trajectory. First, the company has been in an aggressive expansion phase, adding new hospital capacity that operates at sub-optimal utilisation levels during the ramp-up period. New facilities typically require 18-24 months to reach steady-state occupancy and case-mix optimisation. Second, employee costs have risen disproportionately as the company invests in specialist doctors and clinical staff ahead of demand to ensure quality service delivery. Third, depreciation charges have escalated significantly—from ₹11.44 crores in Q1 FY24 to ₹23.96 crores in Q3 FY26—as capitalised assets from expansion projects enter the profit-and-loss statement.
Margin Monitoring Required
Key Concern: Operating margins have compressed 185 basis points YoY to 23.17% in Q3 FY26, with PAT margins declining from 16.31% in Q1 FY26 to 13.44% in Q3 FY26. Investors must monitor whether this represents temporary expansion-related pressure or structural margin challenges.
Watch Points: The employee cost-to-sales ratio of 19.83% and rising depreciation burden require close attention. Management commentary on utilisation rates, average revenue per occupied bed (ARPOB), and case-mix improvements will be critical indicators of margin recovery potential.
Industry Context: Positioned in India's Healthcare Growth Story
Yatharth Hospital operates in India's rapidly expanding organised healthcare sector, which benefits from favourable structural trends including rising health insurance penetration, growing medical tourism, increasing prevalence of lifestyle diseases, and government initiatives like Ayushman Bharat. The company's focus on tier-2 and tier-3 cities in northern India—particularly Uttar Pradesh and surrounding regions—positions it to capture demand in underserved markets with limited competition from established hospital chains.
The hospital sector has witnessed robust growth post-pandemic, with occupancy rates recovering to pre-COVID levels and average revenue per occupied bed (ARPOB) showing steady improvement. Yatharth's 46.23% revenue growth in Q3 FY26 significantly outpaced the broader hospital sector's growth, indicating market share gains and successful capacity additions. However, the company faces intensifying competition as larger hospital chains like Apollo Hospitals, Fortis Healthcare, and Max Healthcare expand their footprint, whilst regional players also scale up operations.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Market Cap (₹ Cr) |
|---|---|---|---|---|---|
| Yatharth Hospital | 40.98 | 3.70 | 11.44% | -0.15 | 6,013 |
| Kovai Medical | 25.85 | 4.96 | 19.55% | 0.08 | — |
| Park Medi World | 33.53 | 6.32 | 0.0% | 0.00 | — |
| Jupiter Life Line | 41.64 | 5.55 | 14.11% | -0.10 | — |
| Jeena Sikho | 109.93 | 32.24 | 33.19% | -0.07 | — |
| Health Global | 237.59 | 9.13 | 3.32% | 1.70 | — |
Yatharth Hospital's valuation multiples position it in the middle of the peer group spectrum. With a P/E ratio of 40.98x, the company trades at a premium to Kovai Medical (25.85x) but at a significant discount to high-growth peers like Jeena Sikho (109.93x) and Health Global (237.59x). The company's price-to-book ratio of 3.70x appears reasonable given its asset-light balance sheet and expansion potential, though the ROE of 11.44% lags peers like Kovai Medical (19.55%) and Jupiter Life Line (14.11%). The net cash position provides Yatharth with a competitive advantage over leveraged peers, enabling faster expansion without balance sheet constraints.
Valuation Analysis: Premium Pricing Limits Entry Appeal
At the current market price of ₹648.60, Yatharth Hospital trades at elevated valuation multiples that reflect high growth expectations. The trailing P/E ratio of 40.98x represents a significant premium to the company's historical earnings growth trajectory, with the PEG ratio of 7.91 indicating expensive pricing relative to growth potential. The company's EV/EBITDA multiple of 24.90x and EV/Sales ratio of 6.07x further underscore the premium valuation, particularly concerning given the margin compression witnessed over recent quarters.
The valuation grade has oscillated between "Expensive" and "Very Expensive" over the past several months, reflecting market uncertainty about the sustainability of growth rates and margin recovery potential. With the stock trading 23.06% below its 52-week high of ₹843.00 but still 87.81% above its 52-week low of ₹345.35, investors face a valuation conundrum—the company offers strong growth visibility but at a price that leaves limited room for disappointment.
The company's price-to-book ratio of 3.70x appears relatively modest compared to its asset base, particularly given the recent capacity additions that enhance long-term earnings potential. However, with ROE of just 11.44%, the premium to book value may not be fully justified until capital efficiency improves. The absence of dividend payments (dividend yield: NA) means investors rely entirely on capital appreciation, increasing sensitivity to earnings growth and margin trajectory.
Fair Value Assessment
Based on peer comparison and growth-adjusted valuation metrics, Yatharth Hospital appears fairly valued to slightly expensive at current levels. A fair P/E multiple of 30-35x (considering 5-year EBIT growth of 15.63% and margin pressures) suggests a fair value range of ₹480-560, implying 22-28% downside from current levels. However, successful execution of expansion plans and margin recovery could justify current valuations over a 2-3 year horizon.
Shareholding Dynamics: Promoter Stake Reduction Raises Questions
The shareholding pattern reveals notable changes over recent quarters, with promoter holding declining from 61.64% in March 2025 to 55.80% in December 2025—a reduction of 5.84 percentage points. This sequential decline warrants attention, as promoter stake sales can signal various intentions ranging from portfolio diversification to concerns about near-term business prospects. The pledged shares at 10.73% of total equity, whilst not alarming, require monitoring to ensure promoters maintain sufficient skin in the game.
| Shareholding Category | Dec'25 | Sep'25 | Jun'25 | QoQ Change |
|---|---|---|---|---|
| Promoter Holding | 55.80% | 61.64% | 61.64% | -5.84% |
| FII Holding | 6.18% | 6.50% | 4.34% | -0.32% |
| Mutual Fund Holding | 9.19% | 7.12% | 9.43% | +2.07% |
| Insurance Holdings | 0.73% | 0.95% | 1.78% | -0.22% |
| Other DII Holdings | 1.09% | 0.64% | 2.31% | +0.45% |
| Non-Institutional | 27.01% | 23.16% | 20.50% | +3.85% |
Institutional participation remains relatively modest, with total FII and domestic institutional investor (DII) holdings at 17.19%. Mutual fund holding increased to 9.19% from 7.12% in September 2025, indicating renewed institutional interest despite the recent stock price correction. The rise in non-institutional holdings to 27.01% from 23.16% suggests retail investor participation has strengthened, potentially providing price support but also increasing volatility risk. The presence of 70 FIIs and 7 mutual funds indicates reasonable institutional coverage, though the relatively low aggregate institutional holding suggests scope for further accumulation if the company delivers on growth and margin improvement.
Stock Performance: Volatility Amid Long-Term Outperformance
Yatharth Hospital's stock performance over the past year presents a study in contrasts—exceptional long-term returns tempered by recent volatility. The one-year return of 47.16% significantly outpaced the Sensex's 6.44% gain and the hospital sector's 11.47% return, generating alpha of 40.72 percentage points. The two-year return of 72.80% further underscores the stock's wealth-creation potential for early investors. However, the recent three-month decline of 21.03% and six-month fall of 5.30% reflect profit-booking and valuation concerns as the stock retreated from its October 2025 highs.
| Period | Stock Return | Sensex Return | Alpha | Performance |
|---|---|---|---|---|
| 1 Week | +17.03% | +0.91% | +16.12% | Strong Outperformance |
| 1 Month | -6.89% | -2.49% | -4.40% | Underperformance |
| 3 Months | -21.03% | -0.17% | -20.86% | Sharp Correction |
| 6 Months | -5.30% | +3.23% | -8.53% | Underperformance |
| YTD | -4.83% | -2.24% | -2.59% | Mild Underperformance |
| 1 Year | +47.16% | +6.44% | +40.72% | Exceptional Outperformance |
| 2 Years | +72.80% | +16.15% | +56.65% | Strong Outperformance |
The stock's beta of 1.35 indicates higher volatility than the broader market, with a one-year volatility of 37.80% compared to the Sensex's 11.52%. This high-beta characteristic makes the stock suitable primarily for risk-tolerant investors with a multi-year investment horizon. The recent one-week surge of 17.03% suggests technical support around the ₹600 level, with the stock bouncing sharply from oversold conditions. However, the stock remains below all major moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), indicating the medium-term trend remains under pressure despite the recent bounce.
The technical trend classification of "Mildly Bullish" as of February 01, 2026 (changed from "Mildly Bearish") suggests early signs of trend reversal, though confirmation requires the stock to reclaim the 50-day moving average at ₹662.57. Key resistance levels lie at ₹657.32 (200-day MA), ₹725.84 (100-day MA), and ultimately the 52-week high of ₹843.00. Support remains firm at the 52-week low of ₹345.35, providing a substantial cushion against downside risk.
Investment Thesis: Growth Story with Execution Risks
Yatharth Hospital's investment case rests on several compelling pillars. The company operates in a structurally attractive sector with long-term tailwinds from India's healthcare underpenetration, rising insurance coverage, and demographic shifts. The management's track record of successful capacity expansion—revenue CAGR of 27.58% over five years—demonstrates execution capability. The net cash balance sheet provides financial flexibility to fund organic growth without dilution or leverage constraints. The company's focus on tier-2 and tier-3 cities offers a differentiated positioning with lower competition intensity compared to metro-focused peers.
However, significant concerns temper the bullish narrative. The persistent margin compression despite strong revenue growth raises questions about operating leverage and pricing power. The modest ROE of 11.44% and five-year EBIT growth of just 15.63% (significantly lagging sales growth) indicate margin challenges may be structural rather than temporary. The promoter stake reduction and elevated pledge percentage of 10.73% warrant scrutiny. Most critically, the PEG ratio of 7.91 and "Very Expensive" valuation grade suggest limited downside protection if growth disappoints or margins fail to recover.
Key Strengths
- Exceptional revenue growth of 46.23% YoY in Q3 FY26, demonstrating strong operational traction
- Net cash position with debt-to-equity of -0.15 provides financial flexibility for expansion
- Strong interest coverage of 29.60x eliminates financial risk concerns
- Presence in underserved tier-2/tier-3 markets with favourable competitive dynamics
- Consistent quarterly revenue growth over seven consecutive quarters
- 47.16% one-year stock return significantly outperforming sector and market
- Increasing mutual fund participation indicating institutional confidence
Key Concerns
- Operating margins compressed 185 bps YoY to 23.17% despite strong revenue growth
- PAT margins declined from 16.31% to 13.44% over three quarters
- Modest ROE of 11.44% lags peer group average
- PEG ratio of 7.91 indicates expensive valuation relative to growth
- Promoter holding declined 5.84% in Q3 FY26, raising questions about confidence
- Pledged shares at 10.73% require monitoring
- Stock trading below all major moving averages despite recent bounce
Outlook: What to Watch in Coming Quarters
The trajectory of Yatharth Hospital's stock over the next 6-12 months will hinge critically on margin recovery and utilisation improvement at newly commissioned facilities. Investors should monitor quarterly operating margin trends, with stabilisation above 24-25% being essential to justify current valuations. The employee cost-to-sales ratio and depreciation trajectory will provide early signals of operating leverage materialisation. Management commentary on bed occupancy rates, average revenue per occupied bed (ARPOB), and case-mix evolution will be crucial indicators of operational maturity.
Positive Catalysts
- Operating margin stabilisation above 24% in Q4 FY26
- Occupancy rate improvement at newly commissioned facilities
- Further institutional buying by mutual funds and FIIs
- Successful commissioning of planned capacity additions
Red Flags to Monitor
- Further margin compression below 23% operating margin
- Additional promoter stake reduction or pledge increase
- Revenue growth deceleration below 30% YoY
- ROE remaining below 12% for multiple quarters
The company's capacity expansion pipeline and geographic diversification offer medium-term growth visibility. However, execution risks remain elevated given the complexity of ramping up multiple facilities simultaneously whilst maintaining service quality. The hospital sector's competitive intensity is increasing, with larger chains expanding into tier-2 cities, potentially pressuring pricing and occupancy rates. Regulatory changes, insurance reimbursement policies, and talent availability will also influence the margin trajectory.
For investors, the key question is whether to pay today's premium valuation for tomorrow's growth potential. The stock's recent correction has improved the risk-reward profile marginally, but substantial downside risk remains if margin recovery disappoints. The technical setup suggests a potential trading range between ₹600-700 in the near term, with a decisive breakout above ₹725 needed to resume the long-term uptrend.
The Verdict: Hold with Cautious Optimism
Score: 58/100
For Fresh Investors: Wait for better entry points around ₹550-580 levels or clear evidence of margin recovery before initiating positions. Current valuations leave limited margin of safety for new investors.
For Existing Holders: Continue holding with a 12-18 month horizon. The growth story remains intact, but margin trajectory will determine upside potential. Consider booking partial profits if the stock rallies towards ₹750-800 levels without corresponding margin improvement.
Fair Value Estimate: ₹520-560 based on 30-32x P/E on FY27 estimated earnings (15-20% downside from current levels), though successful execution could justify ₹700-750 over 18-24 months.
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. The author and publisher are not registered investment advisors and do not provide personalised investment recommendations.
