Entero Healthcare Ltd - Consolidation Engine Gains Momentum - Company Update 

Entero Healthcare reported a strong Q4FY26, with revenue and earnings ahead of our estimates, driven by healthy organic growth and acquisition-led scale-up. The co. continued to outperform IPM at 1.4x, supported by its pan-India distribution platform, wider manufacturer relationships and growing wallet share across pharma and healthcare products. FY26 was also a year of strong execution, with Entero delivering on its stated guidance of 4.0% EBITDA margin and positive operating cash flow of Rs 962mn, aided by better gross margins, working capital efficiencies and operating leverage. Further, the company’s strategic expansion into MedTech is gaining meaningful scale, with MedTech revenues expected to cross Rs 10bn in FY27e, while also supporting margin accretion given the higher commercial role played by Entero in this segment. While we maintain our revenue estimates, we revise our margin assumptions upwards; however, our PAT after MI estimates is lowered due to higher than estimated minority interest. We maintain our positive stance though lower our rating to ACCUMULATE with revised TP at Rs 1,440.

Robust revenue growth:

Entero reported robust revenue growth of 42.6% YoY to Rs 19.1bn (MNCL Est- Rs 17.8bn) in Q4FY26, driven by healthy organic growth and acquisition-led consolidation. Organic growth stood at 16.6% YoY, while new acquisitions contributed 26.0% to growth during the quarter. On a like-for-like basis, revenue grew 43.1% YoY, with the company continuing to outperform IPM at 1.4x. During the year, the company closed seven acquisitions, including three in MedTech, which has now become a meaningful growth lever. For FY27, management has guided 23% revenue growth, excluding any new acquisitions, driven by calendarization benefits of FY26 acquisitions and continued organic momentum across pharma and MedTech.

Best-ever Margins:

Entero reported its best-ever margin performance in Q4FY26, with gross margins expanding by 109bps YoY to 10.9%, driven by better product mix, procurement efficiencies and higher contribution from commercial-role businesses. OPM improved by 85bps YoY to 4.5%, aided by higher gross margins and lower employee expenses (-50bps YoY), partially offset by higher other expenses (+75bps YoY). EBITDA grew 75.9% YoY to Rs 860mn (MNCL Est- Rs 746mn), led by strong revenue growth, margin expansion and operating leverage benefits. Reported PAT grew 43.6% YoY to Rs 451mn (MNCL Est- Rs 432mn); however, adjusted PAT stood at Rs 281mn, up 9.0% YoY, impacted by elevated minority interest. The higher minority interest was due to abnormal contribution from one partially owned subsidiary in Q4FY26, while the management expects to normalise in FY27. For FY26, Entero achieved its guided 4.0% EBITDA margin, while the management has guided for further improvement to 5.0% in FY27, supported by MedTech scale-up, low-margin business rationalisation and operating efficiencies.

Outlook

Entero delivered a strong FY26, meeting its guidance on both 4.0% EBITDA margin and positive OCF of Rs 962mn, supported by margin expansion and working capital efficiencies. Working capital improvement was aided by better operating discipline and higher trade payables, largely driven by the rising contribution of MedTech, where vendor credit periods are longer than pharma distribution. We remain positive on Entero’s consolidation-led model and MedTech scale-up, which should support FY27E growth and margins. However, FY28E growth could moderate as the base becomes larger and acquisition-led contribution normalises.  We maintain our revenue estimates for FY27E/FY28E, while revising margin assumptions upwards, supported by better MedTech performance and an improved overall product mix. Accordingly, our reported PAT estimates move higher; however, PAT after minority interest is revised lower versus our earlier estimates, as we factor in a higher contribution from minority-owned subsidiaries.

Valuation and key risk:

We factor in Revenue/EBITDA/ PAT after MI CAGR of 20%/36%/48% over FY26–28E, led by organic growth, MedTech scale-up and margin expansion. While FY27E growth should remain healthy, FY28E growth could moderate as acquisition-led contribution normalises. We maintain our revenue estimates, revise margin assumptions upwards, but lower Adj. PAT estimates due to higher minority interest. We value Entero at 25x FY28E EPS, arriving at a revised TP of Rs 1,440 (vs. Rs 1,435 earlier), and lower our rating to ACCUMULATE (vs. BUY earlier) on back of sharp-run in the last 6-months. Key risks: Slower organic growth, acquisition integration challenges, higher minority interest, working capital deterioration and slower MedTech ramp-up.

Company website: https://www.enterohealthcare.com/

*CMP is as per report published date

Click to download the full Entero Healthcare Ltd Q4FY26 Company Update

Analyst:

• Rahul Dani - Research Analyst, Institutional Equities (NISM-201500034725)
• Riya Shah - Research Associate, Institutional Equities (NISM-201800191080)

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FAQs on Entero Healthcare Ltd Q4FY26 Company Update

These FAQs summarize key insights from MNCL’s institutional equity research on Entero Healthcare, highlighting performance trends, growth drivers and key risks.

1. What drove Entero Healthcare’s Q4FY26 growth?

Growth was supported by healthy organic expansion, acquisition-led consolidation and rising contribution from the MedTech business.

2. How did margins improve in Q4FY26?

Margins improved due to better product mix, procurement efficiencies, operating leverage and higher contribution from commercial-role businesses.

3. Why is MedTech important for Entero Healthcare?

MedTech offers higher growth potential, stronger margins and longer vendor credit periods, supporting profitability and working capital efficiency.

4. What is the company’s FY27 outlook?

Management expects healthy revenue growth and further EBITDA margin improvement supported by acquisition integration and MedTech scale-up.

5. What are the key risks for Entero Healthcare?

Key risks include slower organic growth, acquisition integration challenges, higher minority interest and slower-than-expected MedTech expansion.

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