The stock market today reflects a significant surge in healthcare shares, particularly for Apollo Hospitals Enterprise Ltd, Fortis Healthcare, and Max Healthcare Institute. These companies have experienced impressive gains, ranging from 22% to 38% year-to-date, signaling strong market confidence in their growth prospects.
Driving this growth are several factors including ongoing expansions, a surge in demand for indoor medical procedures, the revival of international patients due to a resurgence in medical tourism, and significant capacity enhancements across hospitals. Collectively, these elements are positioning the healthcare sector for robust growth.
Analysts Maintain Positive Growth Outlook
HSBC Securities and Capital Markets (India) Private has reaffirmed its optimistic stance on the hospital sector, attributing this confidence to persistent structural growth drivers such as an ageing population, a spike in lifestyle-related health disorders, increased healthcare insurance adoption, and elevating income levels. Analysts are keen on hospitals that have the potential to boost occupancy rates, enhance average revenue per occupied bed (ARPOB), and improve their payor mix. Their top recommendations include Apollo Hospitals Enterprise, with a target price of ₹7,720, as well as Aster DM Healthcare projected at ₹450 and Krishna Institute of Medical Sciences set at ₹660.
Strong Expectations for Q2 Earnings
Looking ahead to the July-September quarter, earnings expectations remain robust. The Delhi National Capital Region (NCR) has experienced significant monsoon activity, resulting in localized flooding which analysts at Jefferies India Pvt Ltd believe will drive high occupancy rates for hospitals in the area. They anticipate notable growth in Earnings before Interest, Tax, Depreciation, and Amortisation (EBITDA) for major players: Apollo Hospitals is expected to see a 20% year-on-year increase, Fortis with a 19% rise, and Max Healthcare projecting an 11% growth. Conversely, Global Health Ltd, commonly known as Medanta, may face a more challenging quarter with only a 4% growth expected, likely due to underperformance at its Lucknow facilities.
The increasing occupancy rates in the Delhi NCR region are also set to benefit Max Healthcare, which is expected to achieve solid EBITDA growth through its current bed capacities. However, the initial profitability of hospitals undergoing expansions may be lower due to high fixed costs. As such, analysts project that the startup costs associated with locations like Dwarka may dampen overall consolidated EBITDA growth, limiting it to low double-digit percentages.
Global Health Ltd, which operates under the Medanta brand, is projected to experience only modest growth. Jefferies highlights that this could be attributed to a year-over-year decline in EBITDA at its Lucknow hospitals, suggesting the company may need to strategize effectively to enhance its performance moving forward.
Disclaimer: The views and recommendations presented here are those of individual analysts or brokerage firms, and do not represent an endorsement from our publication. We encourage investors to consult with certified financial experts before making any investment decisions.
