By Brazil Stock Guide — Brazilian hospital operator Mater Dei (B3: MATD3) nearly doubled its third-quarter net profit as higher revenue per patient, a more profitable mix of medical procedures and tighter cost controls helped offset rising operating expenses,.
Net income rose 91% from a year earlier to R$52 million ($9.5 million), while net revenue increased 16% to R$660 million. Earnings before interest, taxes, depreciation and amortization (EBITDA) climbed 18% to R$148 million, slightly above BTG Pactual’s estimates. The EBITDA margin widened by 30 basis points to 22.5%.
Revenue growth was driven primarily by a 15% increase in average revenue per patient, reflecting higher prices and a greater contribution from complex medical procedures, particularly oncology. Patient days increased by just 1%, suggesting that improved revenue per patient, rather than higher patient volumes, accounted for most of the expansion. Hospital occupancy reached 77.7%, up 1.4 percentage points from a year earlier.
Gross profit rose 22% to R$209 million, with the gross margin expanding by 1.6 percentage points to 31.7%. The improvement reflected better cost management, particularly in personnel and medical services. However, operating expenses rose 24%, partly because of higher provisions for doubtful accounts, limiting the improvement in profitability.
Cash generation was less encouraging. Operating cash flow before interest fell 16% to R$97 million, while free cash flow after capital expenditure declined 38% to R$59 million. Capital spending increased to R$39 million from R$21 million a year earlier. After interest payments, BTG estimated slightly negative free cash flow to equity of R$4 million, compared with a positive R$50 million in the same quarter last year.
Despite weaker cash generation, Mater Dei continued to reduce its leverage. Net debt declined by R$32 million from the previous quarter to R$731 million, bringing the net debt-to-EBITDA ratio down to 1.4 times from 1.5 times at the end of June.
BTG Pactual maintained its Buy recommendation and 12-month price target of R$7 per share, implying approximately 39% upside from the R$5.02 reference price in its report. The bank expects Mater Dei’s EBITDA to rise to R$684 million in 2027 from a projected R$550 million in 2026, supported by continued operational improvements.
Still, BTG cautioned that Brazil’s elevated interest rates and financial-market volatility could complicate investment in relatively illiquid small-cap stocks. While remaining positive on Mater Dei’s fundamentals and valuation, the bank said it continued to favor more defensive investments across its broader healthcare coverage.
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