2023 in Review: Hospital stocks see stellar gains, Medanta, Max, Narayana, fortis, Apollo amongst top performers

 Share prices of Apollo Hospitals Enterprise Fortis Healthcare Max healthcare Institute Narayana Hrudayalaya have seen handsome gains of 27-58% during 2023. Global Health (Medanta) has seen its share price more than double.  The  stellar gains for the hospital stocks have been driven by improving earnings outlook. As the rising non covid revenues helped, the improved occupancy, higher in patients and indoor procedures, rising insurance penetration, rebound in medical tourism and expansions being undertaken by hospitals to cater to strong rise in demand are some of the key earning drivers.

While the September-December quarter remains seasonally weak due to festivals and holiday season, The hospitals had seen strong first half performance which had been aided by better-than-expected improvement in operational parameters such as ARPOB (average revenues per operating bed) and occupancy. The September quarter also benefitted from seasonality factors. During the September quarter hospitals as Apollo, Max Healthcare, Medanta sales, Ebitda and net profit grew 16%, 18% and 24% yea-on-year on an aggregate basis respectively as per Motilal Oswal Financial Services , outperforming their estimates by 5%,11% and 8% respectively.

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Even analysts at Jefferies India Pvt Ltd said that the quarter saw healthy ARPOB as well as volume growth. Hospital divisions for all  hospitals in Jefferies coverage universe clocked double-digit sales and Ebitda growth. Payor mix continued to get boost from higher international revenue share while case mix got Oncology boost said analysts at Jefferies.

In FY23, Hospitals witnessed substantial mid-teen revenue growth, driven by several factors including expansion in Average Revenue Per Occupied Bed (ARPOB), amplified occupancy rates, augmented operational bed capacity, and a reduction in the average length of patient stays (ALOS), said CareEdge. Despite pre-pandemic comparisons, the industry maintained robust operating margins, attributed to increased ARPOB, higher surgical volumes, an improved payor mix, and the sustained advantages derived from cost-optimization strategies implemented during the pandemic, as per the rating agency.

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Analysts expect the gains to continue. “The Indian healthcare industry stands on the cusp of a profound transformation, driven by key factors that underpin its fundamental growth. These include an ageing demographic, increased public health spending, expanding insurance coverage, and rising per-capita income. Moreover, the industry is witnessing structural shifts, particularly in the wake of the Covid-19 pandemic, manifesting in a surge in communicable diseases and a notable uptick in medical tourism. This trajectory is projected to sustain a robust CAGR of 12% over the upcoming three fiscal years, spanning from FY23 to FY26,” said D. Naveen Kumar, Associate Director at CareEdge Ratings.