Executive Summary / Key Takeaways

• Integrated Model Resilience Amid Mexico Headwinds: Auna's Q3 2025 results show a flat quarter dragged down by Mexico's 12% revenue decline, yet Peru and Colombia delivered strong 9% and 5% local currency growth respectively, demonstrating the diversified platform's ability to absorb market-specific shocks while maintaining consolidated stability.

• Peru as Scalable Best-Practice Blueprint: Peru's segment generated over half of consolidated revenues with 22.7% EBITDA margins (up 1.1 points), 49.3% medical loss ratio, and 1.5 percentage point utilization gains, validating Auna's integrated "AunaWay" model as a replicable growth engine for the entire region.

• Mexico Recovery Story with Catalysts: Despite current challenges from legacy physician volumes and IT system migrations, management anticipates 2026 as a "year of full recovery," backed by a revamped leadership team, Sojitz Corporation (8002.T) partnership unlocking $500M in growth capital, and targeted initiatives to increase out-of-pocket revenue from 8% to 20%.

• Financial Flexibility Enhanced Through Refinancing: November 2025's $765 million debt refinancing extended maturities, reduced interest costs by 125 basis points, and maintained leverage at 2.06x debt-to-equity despite EBITDA pressure, providing dry powder for the Mexico investment cycle while preserving the 3x medium-term target.

• Valuation Disconnect Creates Asymmetric Risk/Reward: Trading at $4.68 with a 5.49x EV/EBITDA multiple and 2.44x price-to-free-cash-flow ratio—while generating $50.5M quarterly free cash flow and 11.41% ROE—the stock appears to price in permanent Mexico weakness, ignoring Peru's proven scalability and the 2026 recovery trajectory.

Setting the Scene: The Integrated Healthcare Platform

Auna S.A., founded in 1989 in Luxembourg, has evolved into a vertically integrated healthcare provider spanning Mexico, Peru, and Colombia. The company operates a unique hybrid model combining hospital networks with proprietary health plans, most notably the OncoSalud brand, creating a closed-loop ecosystem that captures value across the entire patient journey. This integration matters because it transforms Auna from a passive service provider into an active risk manager, enabling direct control over both cost structure and patient outcomes—critical advantages in Latin America's fragmented healthcare markets where private insurance penetration remains strikingly low.

The regional opportunity is substantial. Peru's private insurance penetration sits at only 6%, leaving a massive addressable market of partially insured and out-of-pocket patients. Mexico's market is similarly fragmented, with 92% of private hospitals operating fewer than 25 beds, limiting their ability to deliver high-complexity care. Colombia's system, while more developed, suffers from government-intervened payers that create payment uncertainty. Auna's strategy directly addresses these structural inefficiencies by building scaled, integrated platforms that can deliver complex care while managing financial risk through proprietary insurance products.

Competitively, Auna occupies a distinct niche. Against Peru-focused players like Clínica Internacional and SANNA, Auna's multi-country footprint and integrated plans provide superior diversification and recurring revenue. Versus Mexico's Grupo Hospitales Ángeles and Christus Health, Auna's oncology specialization and prepaid model offer higher-margin, stickier revenue streams. The key differentiator is Auna's ability to replicate its Peru success—a market where it commands over half of consolidated revenue—into larger, underpenetrated markets.

Technology, Products, and Strategic Differentiation

Auna's "AunaWay" model represents more than operational jargon; it's a systematic approach to integrating patient care across specialties and payment mechanisms. The model's core economic value lies in its ability to increase patient lifetime value while reducing cost per episode. In Peru, this manifests as higher surgical procedure efficiencies and improved pharmaceutical cost management at OncoSalud, directly driving the 1.1 percentage point EBITDA margin expansion to 22.7%. The model's success in Peru provides a credible blueprint for Mexico, where management is now rolling out package service offerings and physician engagement initiatives.

Technology implementation serves as both enabler and near-term headwind. The new hospital information and ERP system at Doctors Hospital in Mexico disrupted Q3 billings, contributing to the 12% revenue decline. However, this temporary pain creates long-term gain: the system will enhance management visibility, cost control, and decision-making across Mexico's operations. The "so what" is clear—short-term margin pressure from implementation costs and billing delays will give way to improved utilization and pricing discipline as the system enables data-driven physician productivity management.

Oncology capabilities anchor Auna's competitive moat. The recent acquisition of Opción Oncología in Monterrey, which grew revenues 21% quarter-over-quarter, combined with the new OncoCenter at Doctors Hospital, positions Auna to capture high-complexity, high-margin cancer care. In Mexico, where oncology and cardiology services surged 48% versus Q2 2025 to represent 15% of segment revenue, this specialization creates pricing power and patient loyalty that generalist hospitals cannot match. The massive gap in Mexico's healthcare market—where cancer patients often navigate multiple institutions—creates a clear value proposition for Auna's integrated oncology centers.

Financial Performance & Segment Dynamics

Auna's Q3 2025 results tell a tale of two regions. Consolidated FX-neutral revenue grew just 1%, masking the divergent performance: Peru's healthcare revenues climbed 9% driven by higher ticket sizes and emergency visit volumes, while Colombia's top line rose 5% through risk-sharing model implementation. Mexico's 12% revenue decline, however, dragged consolidated adjusted EBITDA down 5% FX-neutral, demonstrating the disproportionate impact of Mexico's operational challenges.

Peru's segment economics validate the platform's scalability. The 9% revenue growth combined with 15% EBITDA growth and 1.1 percentage point margin expansion to 22.7% shows operating leverage in action. The medical loss ratio falling to 49.3% reflects superior cost management, while the 1.5 percentage point utilization increase (despite added bed capacity) indicates strong demand. These metrics matter because they prove Auna can grow profitably while expanding capacity—a critical prerequisite for replicating this model in Mexico.

Colombia's transformation through risk mitigation is equally instructive. The shift from 20% to 13% revenue exposure to government-intervened payer Nueva EPS, while increasing risk-sharing models from 14% to 18% of revenue, demonstrates proactive risk management. This diversification, combined with 18% EBITDA growth and 1.7 percentage point margin expansion, shows that Auna can engineer profitable growth even in politically challenging markets. The successful addition of Salud Total under a new PGP program provides a template for further payer diversification.

Mexico's challenges are real but addressable. The 12% revenue decline stemmed from slower legacy physician volume recovery and IT system implementation issues. However, underlying operational metrics show promise: surgery volumes increased for the second consecutive quarter, oncology services surged 48%, and out-of-pocket revenue grew 15%. The segment's 29% EBITDA margin, while pressured, remains healthy. Management's physician engagement initiative—targeting 140 top physicians representing 25-35% of hospital revenues—has already produced double-digit productivity gains for half the targeted doctors and attracted 10 physicians from a competing hospital.

The balance sheet reflects disciplined capital management. Despite EBITDA pressure, leverage remained unchanged at 2.06x debt-to-equity due to gross debt reduction. The November 2025 refinancing of $765 million—comprising $365 million of 8.75% senior secured notes due 2032 and a $400 million Mexican peso term loan—extended maturities and reduced interest costs by 125 basis points. This 31% reduction in nine-month CapEx to $98 million, combined with $50.5 million quarterly free cash flow generation, demonstrates capital discipline while funding growth initiatives.

Outlook, Management Guidance, and Execution Risk

Management's guidance frames 2025 as a transition year and 2026 as an inflection point. The declaration that "2025 will be a flat year" and "2026 will be a growth year" is not capitulation but rather a realistic assessment of Mexico's recovery timeline. The "so what" for investors is critical: Auna is absorbing near-term pain to build sustainable competitive advantages, and the market appears to be pricing the stock as if this transition will fail.

The Sojitz Corporation partnership, formalized through a memorandum of understanding, provides the capital catalyst for Mexico's turnaround. The $500 million investment plan over three to five years—representing a sizable portion of Auna's $1.36 billion enterprise value—targets high-teens revenue growth and margin expansion. This partnership is structured to accelerate growth while maintaining the deleveraging path to 3x net debt-to-EBITDA, addressing the key concern that growth investments would compromise financial health.

Peru's Trecca project, a public-private partnership awarded in 2010 that received its construction license in November 2025, exemplifies Auna's long-term value creation approach. The 18-year contract, with building commencing early next year, will deliver over $200 million in annual sales at scale while remaining debt-neutral for Auna. The project's structure—where the state finances building and services—allows Auna to capture significant revenue without balance sheet strain, providing a blueprint for future public-private collaborations.

In Mexico, the path to recovery hinges on three initiatives: physician engagement (already showing productivity gains), preferred payer network expansion (negotiations underway with largest insurers), and out-of-pocket segment growth (targeting 20% of revenue by end-2026 from 8% currently). The 15% Q3 growth in out-of-pocket revenue, combined with the 48% surge in oncology services, suggests these initiatives are gaining traction. Management's confidence is bolstered by the new leadership team, including a Chief Medical Officer and Head of Commercial Operations with deep Mexico healthcare experience.

Risks and Asymmetries

The primary risk remains Mexico execution. If physician retention falters or the IT system migration at Doctors Hospital encounters further setbacks, the 2026 recovery could be delayed. Healthcare talent is thin in Monterrey, and competitors are actively recruiting. The slower-than-expected recovery from legacy doctor volumes indicates that disrupting established referral patterns takes longer than anticipated, potentially compressing margins further before improvement.

Colombia's political environment presents ongoing uncertainty. While management is "constructive" on opportunities toward end-2026 and into 2027, the intervened payer situation remains fluid. The recent capitalization of Nueva EPS by the central government is positive, but elections could alter healthcare policy. Auna's reduced exposure to 13% of Colombian revenue from this payer mitigates but doesn't eliminate risk.

Currency exposure creates financial volatility. With 86% of USD debt hedged to the Peruvian sol but significant operations in Mexico and Colombia, peso depreciation impacts reported results. The 16% Mexican peso and 9% Colombian peso depreciation in 2025 already pressured as-reported EBITDA, and further weakness could mask underlying operational improvements.

Leverage, while manageable at 2.06x debt-to-equity, requires monitoring. The commitment to reduce to 3x net debt-to-EBITDA provides a clear target, but any EBITDA shortfall from Mexico could delay this trajectory. However, the debt-neutral structure of the Trecca project and Sojitz Corporation partnership's capital injection suggest management is actively de-risking the balance sheet.

Valuation Context

At $4.68 per share, Auna trades at a market capitalization of $348.6 million and enterprise value of $1.36 billion, representing 1.06x EV/Revenue and 5.49x EV/EBITDA based on trailing performance. These multiples compare favorably to regional healthcare peers, particularly given the company's 11.41% return on equity and 38.68% gross margin.

The cash flow metrics reveal compelling value: price-to-operating-cash-flow of 1.81x and price-to-free-cash-flow of 2.44x, with quarterly free cash flow of $50.5 million demonstrating strong cash conversion. The 4.81x P/E ratio appears depressed relative to the 14.83% operating margin and 4.34% net margin, suggesting the market is pricing in significant earnings deterioration that management's 2026 recovery guidance contradicts.

Enterprise value to revenue of 1.06x appears particularly attractive when considering Peru's 9% growth rate and the $500 million Sojitz Corporation investment targeting high-teens growth. The valuation implies a terminal growth rate far below what the integrated model and market opportunity support, creating potential upside if Mexico executes as planned.

Conclusion

Auna's integrated healthcare platform has demonstrated remarkable resilience through Q3 2025's Mexico headwinds, with Peru's scalable model and Colombia's risk mitigation providing stable foundations. The company's strategic response—revamping Mexico leadership, securing Sojitz Corporation partnership capital, and advancing debt-neutral growth projects—positions 2026 as an inflection point. Trading at 5.49x EV/EBITDA and 2.44x P/FCF while generating $50.5 million quarterly free cash flow, the stock appears to discount permanent Mexico weakness rather than temporary transition.

The critical variables to monitor are Mexico's physician engagement metrics, preferred payer network negotiations, and the pace of out-of-pocket revenue growth. If these initiatives deliver the targeted high-teens growth, the current valuation will prove conservative. Conversely, further Mexico execution stumbles or Colombia political deterioration could pressure the 2.06x leverage ratio and delay deleveraging. For investors, the asymmetric risk/reward favors patience: the integrated model's proven success in Peru provides a credible blueprint, the balance sheet is strengthening, and the valuation leaves substantial upside if management's 2026 recovery thesis materializes.