JM Financial calls Metropolis Healthcare ‘best-value diagnostic stock’, sees up to 27% upside

JM Financial has maintained its Buy rating on Metropolis Healthcare (MHL) with a 12-month target price of Rs 734, implying an upside of 27.2% from the current market price of Rs 577.

The rating and target remain unchanged from the brokerage's previous estimate, following an analyst meeting on August 27.

The brokerage values MHL at 45 times its estimated June 2028 earnings. According to JM Financial, the stock currently trades at 34 times June 2028 estimated earnings, making it the cheapest among India's four leading listed diagnostics companies. It is trading at a discount of around 28% to the other three players and about 25% to its long-term average.


JM Financial's bullish call is based on MHL's strategy of extracting more growth from its existing network without significantly increasing fixed costs. The company has more than 5,000 labs and collection centres across over 750 towns, with B2C (business-to-consumer) contributing 57% of revenue, and plans to increase its owned centres from around 750 to 1,000.

As part of its FY26-FY29 plan, MHL aims to increase its centre-to-lab ratio from 24:1 to 35:1, higher than its previous target of 30:1. It also plans to develop around 100 mini-hubs, including 50 upgraded locations and 50 new centres.

The strategy is focused on improving network utilisation, increasing centre density and expanding further into Tier-2 and Tier-3 markets. Technology, automation, standardised processes and vendor consolidation are expected to improve productivity and reduce the cost per test. Capital expenditure is expected to remain controlled at around 4% of revenue.

Management has guided for revenue growth of 14-15% and an improvement of 100-150 basis points in margins during FY27. JM Financial believes MHL could outperform this guidance, supported by stronger industry volumes. The company reported 17% year-on-year revenue growth in the June 2026 quarter (Q1FY27), typically its seasonally weakest, with the brokerage expecting stronger performance in the second and fourth quarters.

JM Financial forecasts revenue, EBITDA and profit after tax to grow at compound annual rates of 16%, 19% and 32%, respectively, between FY26 and FY29.

Revenue is projected to rise from around Rs 1,646 crore in FY26 to Rs 2,582 crore in FY29, while EBITDA is expected to increase from Rs 401 crore to Rs 683 crore, with the EBITDA margin expanding from 24.4% to 26.5%. Profit after tax is estimated to climb from Rs 190 crore to Rs 442 crore over the same period. The brokerage also expects MHL to generate around Rs 1,100 crore in free cash flow between FY26 and FY29.

On the channel front, the consumer-facing B2C business is expected to grow faster, supported by centre expansion, digital ordering and home collection. Digital channels now contribute 25% of revenue, while home collection covers around 2,200 PIN codes. MHL also plans to cross-sell tests from Core—the oncology and genomics diagnostics company it acquired—through its B2B network.

Speciality testing is expected to increase from around 40% of revenue to 45% over three years. Meanwhile, the contribution from TruHealth, MHL's preventive and chronic-care wellness offering, is targeted to rise from 18% to about 25% over the same period. MHL is also testing basic radiology services through mini-hubs but is not planning a large MRI- or CT-led expansion.

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On acquisitions, management intends to remain selective. MHL will focus on regional brands and specialised businesses that can improve their economics through its network, while maintaining discipline on valuations. Its core three-year plan remains centred on organic growth, with acquisitions serving as supplementary opportunities.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)