High-Complexity Care Expansion Will Drive A Powerful Long-Term Upswing

Catalysts

About Hospital Mater Dei

Hospital Mater Dei operates a growing, high-complexity hospital network focused on acute care, oncology, diagnostics, and specialized procedures across key Brazilian regions.

What are the underlying business or industry changes driving this perspective?

• Acceleration of high-complexity care and oncology volumes across units, led by record growth in oncological patients and surgeries in Salvador and Nova Lima, is expected to structurally lift average ticket, revenue density per bed and overall top line.
• Disciplined capacity management with occupancy consistently around 80 to 85 percent, together with a strategic shift away from bed-driven expansion toward higher productivity per asset, is driving sustainable operating leverage and EBITDA margin expansion.
• Deepening partnerships with major health insurers, including new plan accreditations and selective agreements such as Unimed in Uberlândia, are improving case mix and pricing power and supporting continued revenue growth and healthier net margins.
• Ongoing integration of acquired hospitals, leaner administrative structures and data-driven cost controls, even after higher nursing wage floors, should help keep costs below 70 percent of revenue and structurally enhance earnings resilience.
• Expansion into underpenetrated, economically vibrant regions such as Mariana with Vale and the planned São Paulo greenfield with Bradesco broadens geographic reach and brand recognition and may support a multi year runway for revenue growth, cash generation and earnings compounding.

Assumptions

This narrative explores a more optimistic perspective on Hospital Mater Dei compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Hospital Mater Dei's revenue will grow by 11.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.9% today to 10.5% in 3 years time.
• The bullish analysts expect earnings to reach R$306.4 million (and earnings per share of R$0.79) by about December 2028, up from R$81.3 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as R$215.7 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 12.0x on those 2028 earnings, down from 19.0x today. This future PE is lower than the current PE for the BR Healthcare industry at 16.0x.
• The bullish analysts expect the number of shares outstanding to decline by 2.48% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 19.52%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The strategy of prioritizing higher complexity procedures such as oncology and cardiology concentrates revenue in segments that are more cyclical and dependent on health insurers willingness to pay. Any regulatory pressure on reimbursement or shift in clinical protocols could dilute the average ticket and slow top line growth, negatively affecting revenue and EBITDA margins in the long term.
• Occupancy is already running at a structurally high 80 to 85 percent and management acknowledges limited room to push this further. This means future growth must come mainly from mix and price rather than volume, leaving less buffer if competitive pressure or weaker macro conditions cap price increases and compress revenue density per bed, weighing on revenue and net margins over time.
• The bullish case depends heavily on rapid ramp up and integration of newer and acquired units in Salvador, Nova Lima, Uberlândia, Goiânia and Mariana. If medical teams fail to consolidate, partnerships like Unimed do not scale as expected or local demand slows, these hospitals may underutilize capacity and drag groupwide profitability, pressuring EBITDA and earnings.
• Despite current leverage of 1.6 times and recent debenture rollovers, the company still carries sizeable gross debt in a high interest rate environment. If Brazilian rates stay elevated for longer or cash generation from operations disappoints, interest expenses may absorb a meaningful share of operating gains and limit the scope for buybacks and growth investments, constraining net profit and earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Hospital Mater Dei is R$7.0, which represents up to two standard deviations above the consensus price target of R$5.93. This valuation is based on what can be assumed as the expectations of Hospital Mater Dei's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of R$7.0, and the most bearish reporting a price target of just R$4.5.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be R$2.9 billion, earnings will come to R$306.4 million, and it would be trading on a PE ratio of 12.0x, assuming you use a discount rate of 19.5%.
  
• Given the current share price of R$4.64, the analyst price target of R$7.0 is 33.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.