Axis Securities has initiated coverage on Rainbow Children's Medicare with a 'Buy' call. The brokerage has given a target of ₹1,625 per share, implying a 21 per cent upside from Tuesday's close of ₹1,341.7 per share, driven by Rainbow's scalable asset-light model and strong positioning in complex paediatric and perinatal care.
On Tuesday, Rainbow Children's Medicare share price closed 1.06 per cent higher at ₹1355.95 per share. In comparison, BSE Sensex was down 0.12 per cent at 80,267.62.
Why is Axis Securities bullish on Rainbow Children's Medicare?
Excellence in Paediatric and Neonatal Care
Rainbow is India's largest multi-speciality paediatric and perinatal healthcare chain, built on clinical excellence, early specialisation, and disciplined expansion, believes Axis Securities. Its hub-and-spoke model -- anchored by Hyderabad (950 beds), Bengaluru (500 beds), and Chennai (300 beds) -- enables efficient expansion, scale-driven synergies, and strong referral networks.
Nearly one-third of Rainbow's beds are ICU-focused, the highest in the sector, equipping it to handle high-acuity, complex paediatric and neonatal cases, including congenital interventions, emergency surgeries, and high-risk deliveries. Its integrated mother-and-child ecosystem enhances patient stickiness and establishes Rainbow as the referral destination of choice.
Asset-light model: Structural margin advantage
The company's asset-light hub-and-spoke model is the cornerstone of its investment appeal, according to brokerage. Large hubs deliver tertiary and quaternary care, while smaller spoke hospitals cater to primary and secondary needs at significantly lower capex, achieving quicker break-even.
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The brokerage reckons that this strategy maximises referral synergies, optimises super-speciality doctor utilisation, and enables rapid, capital-efficient geographic expansion. With capex per bed of ₹5-6 million compared to significantly higher spends by peers, the model drives structurally superior Earnings before interest, tax and amortisation (Ebitda) margins (32 per cent), minimal debt, and scalable growth across cities, making Rainbow a compelling long-term investment in paediatric and maternity healthcare. CATCH STOCK MARKET LIVE UPDATES TODAY
Capacity expansion underway
Rainbow is targeting a 1.5 times increase in capacity over the next three years through a mix of greenfield projects and acquisitions.Key projects include:
* Gurugram: 300-bed hub + 100-bed spoke
* Coimbatore: 130 beds (FY27E)
* Rajahmundry: 100 beds (FY25E)
* Guwahati: 100 operational + 50 planned
* Multiple Bengaluru spokes and the Warangal acquisition
Strong cashflows, debt-free growth
With obligations limited to leases, Rainbow operates a debt-free balance sheet and robust cash flow profile. Over FY26-28E, Axis Securities expects the company to generate ₹1,100-1,200 crore in Free cash flow to the firm (FCFF), sufficient to fund ongoing expansions, including Gurugram and Tamil Nadu. Supported by ₹700 crore in cash, recent acquisitions in Guwahati and Warangal, and healthy operating cash flows, Rainbow is well-placed to self-fund growth as well as pursue strategic merger and acquisition (M&A).
Outlook
The brokerage expects double-digit revenue growth with sustained 32-33 per cent Ebitda margins over the medium term, backed by disciplined execution and favourable industry tailwinds.
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